* Ex-HSBC executive Irene Dorner tipped as non-exec chair
* Could create first female CEO-chairwoman duo in FTSE 350
* Dorner also held roles at AXA and Rolls Royce
* CEO Gadhia long-term advocate of women equality in finance (Adds Gadhia comments on sexism, misconduct at RBS)
By Noor Zainab Hussain, Esha Vaish and Emma Rumney
Oct 25 (Reuters) - Virgin Money is paving the way for the only female chair and chief executive team among Britain's top 350 listed companies with plans to hire former HSBC executive Irene Dorner as its chairwoman.
Britain's top four lenders all have male chief executives and chairmen and Virgin Money's announcement on Wednesday comes after its chief executive Jayne-Anne Gadhia highlighted "pervading sexism" in the financial services industry.
Gadhia told British lawmakers on Tuesday of examples of inappropriate behaviour by men that she was aware of during her career, and said that while things were improving, women continue to face numerous barriers to progress in the industry.
A vocal advocate for greater representation of women in senior roles in the financial services sector, Gadhia highlighted one incident while she was running Royal Bank of Scotland's mortgage division in the early 2000s.
"There was a very male culture... and undoubtedly there was a sort of pervading sexism where I remember a very senior woman being very upset one day telling me that she was expected to sleep with her boss" Gadhia said.
"That sort of thing of course means that there are issues for women in progressing through financial services."
A spokeswoman for RBS said the bank encouraged people to come forward in confidence to report inappropriate behaviour.
"These allegations are shocking and are clearly unacceptable no matter how historic they may be," she said.
If Dorner gets regulatory approval she will take over from Glen Moreno, who intends to retire in 2018, and join Gadhia who is the first female CEO of a listed British bank.
Dorner, 62, held many roles at HSBC, including chief executive of HSBC USA, and has also been a non-executive director at French insurer AXA and British engineering group Rolls Royce.
Women directors are still relatively few in Britain despite government efforts to encourage companies to appoint more and Dorner's appointment would make Virgin Money the only FTSE 350 company to have an all female duo at the helm..
Nearly two-thirds of Britain's 350 biggest listed companies failed to reach a target of having 25 percent of female board members last year, and four-fifths had two or fewer women on their boards, an inquiry by the Equalities and Human Rights Commission into fairness, transparency and diversity found.
A report commissioned by Virgin Money and the British government found that although the number of women on FTSE 100 boards across financial services and other sectors has risen to 26.1 percent, only 9.6 percent of them hold executive positions.
Last year Gadhia oversaw the drawing up of the government's Women in Finance Charter which had 141 signatories as of July, including Bank of America Merrill Lynch and Deutsche Bank, although she said on Tuesday that some firms were still to sign up to the 10-point plan.
Theresa May, who became only the second female British prime minister after Margaret Thatcher, has criticised the finance industry for failing to promote and retain women.
Other women in senior executive roles include Ana Botin, who is executive chairman of Santander and Inga Beale, who is CEO of Lloyd's of London. (Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by Jane Merriman and Alexander Smith)