UPDATE 2-Tesco Bank to appoint John Kingman as chairman - source

* Tesco Bank to change chairman in few months- source

* Board changes come after fallout of 2016 cyber attack

* Tesco Bank appoints John Kingman to board (Recasts with source information)

By Muvija M

Oct 7 (Reuters) - Tesco's financial arm intends to appoint John Kingman, the businessman who oversaw Britain's bailout of its banks during the financial crisis, as its chairman, a source with knowledge of the matter told Reuters.

Tesco Bank on Monday appointed Kingman to its board as a non-executive director, following a Sky News report on Saturday that the retail lender was lining him up to be its chairman.

Kingman will eventually replace Graham Pimlott as chairman in a few months' time and following regulatory approval, the source said.

Kingman was closely involved in the British government's response to the 2008 financial crisis as Second Permanent Secretary to the Treasury, and his appointment as a non-executive director is effective next month, Tesco Bank said in a statement.

"I am delighted to welcome Sir John to the board. His experience speaks for itself and will be invaluable as we drive the change required to ensure the bank can best serve a broad range of Tesco customers," Pimlott said.

Kingman, the chairman of Legal & General Group Plc, has also been touted as a possible contender to be the next governor of the Bank of England, although he has said he does not want the role. (https://bit.ly/2p1WXxj)

Kingman's appointment as chairman would come a year after Britain's markets watchdog fined Tesco 16.4 million pounds ($20.18 million) for failing to protect account holders at its bank from a "foreseeable" cyber attack in 2016.

The lender last month agreed to sell its 3.7 billion pounds British mortgage portfolio to Lloyds Banking Group, after announcing in May that it would halt mortgage lending due to stiff competition.

Britain's financial services firms are bracing for a fallout from a tumultuous Brexit process, with options ranging from a no-deal departure to second referendum still in play, while recent data has also raised recession fears in Britain.

Kingman handled the resolution of Northern Rock and led negotiations with RBS, Lloyds and HBOS on their 37 billion pound recapitalisation during the financial crisis, according to L&G's website.

Tesco Plc, which owns Tesco Bank, said last week its chief executive officer, Dave Lewis, is set to step down next year after completing a turnaround at Britain's biggest retailer.

($1 = 0.8127 pounds) ($1 = 0.8137 pounds) (Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and Louise Heavens)