* Mervyn Davies resigns as Standard Chartered chairman
* Ex-CEO becomes UK minister for trade & investment
* StanChart shares down 10 pct as banks slump
(Adds background on Davies, spokesman, updates share reaction)
LONDON, Jan 14 Standard Chartered (STAN.L) said Mervyn Davies stepped down as chairman of the Asia-focused bank on Wednesday to take up a key role in the British government.
Davies is highly regarded after leading Standard Chartered as chief executive from 2001 to 2006 and as non-executive chairman in the last two years and implementing a clear strategy targeting Asia, Africa and the Middle East.
He is leaving with immediate effect to take up a role as UK minister for trade and investment.
A spokesman for Prime Minister Gordon Brown said Davies will bring "a huge amount of financial expertise" and experience of international business. He follows Paul Myners, the former fund manager and businessman, into a government role.
Davies' position will be unpaid but he will receive a life peerage.
Standard Chartered appointed Deputy Chairman John Peace as acting chairman and has started the search for a full-time successor.
Standard Chartered shares fell 10.7 percent to 745.5 pence alongside a sharp fall across the European banking sector.
Davies, 56, joined Standard Chartered in 1993 and had been on the board since 1997.
He is a fluent Welsh speaker and sports enthusiast. He is on the board of English football club Tottenham Hotspur and often tested the voting system at Standard Chartered's annual meetings by quizzing investors on how they thought Tottenham would fare in the season ahead.
(Reporting by Steve Slater; editing by Simon Jessop and Elaine Hardcastle)