It emerged two weeks ago that Mr O’Grady (53) was stepping down as chief financial officer of Musgrave, a little over four months after he joined the group from Bank of Ireland, to pursue a “unique leadership opportunity”. This prompted speculation that he was being lined up to succeed the bank’s outgoing chief executive Francesca McDonagh.

It is reported that the bank’s board, led by chairman Patrick Kennedy, has picked Mr O’Grady to become its chief executive, subject to him clearing a vetting process by regulatory officials from the European Central Bank and Central Bank of Ireland.

Meanwhile, Bank of Ireland is expected to announce the appointment of Gavin Kelly, chief executive of its Irish retail banking unit, as its interim group chief executive in the coming days. Ms McDonagh is set to leave the group by the end of the week after five years at the helm, to become group chief operating officer at financial giant Credit Suisse.

The change at the top of Bank of Ireland comes as the Government is expected to cut the State’s stake in the lender to zero in the coming months. Minister for Finance Paschal Donohoe has reduced the holding in the past 14 months from 13.9 per cent to below 3 per cent — taking it from being the bank’s main shareholder to outside the top 10.