Business minister Vince Cable said Bob Diamond's rise to the top post at Barclays bank highlights the task the government faces in trying to make the banking sector safer.
"We are worried about this combination of the casinos and the traditional banking," Cable, a Liberal Democrat in the Conservative-led coalition administration, told BBC radio.
Cable is upset about the appointment but he stopped short of directly criticising the Barclays board.
Cable has in the past called for the break-up of universal banks to avoid a repeat of the financial crisis.
"It isn't government's job to appoint the head of a private bank. But what this point illustrates is the wider policy question which is a matter for the government about how the banks can be made safe."
Barclays said on Tuesday it had appointed Diamond, the head of its investment and wealth management business Barclays Capital, as its new group chief executive starting from next year.
"Mr Diamond illustrates in a particularly graphic way what happens when you have an extremely high paid head of an investment bank taking over one of these major international banks," Cable said.
"It does illustrate the wisdom of the government's decision to set up this banking commission to look at the structure of banks," he said.
City A.M. Reporter