Chancellor George Osborne is to call for banks to ring-fence their retail operations from their investment banking activity today.
According to reports, Osborne will say in a speech today that banks must separate retail deposits from wholesale trading so that public savings and loans would not be put at risk should their investment banking arm get into trouble.
The separation of banks’ operations was recommended by the Independent Commission on Banking in its interim report in April.
In his annual Mansion House speech, Osborne is also expected to announce the privatisation of Northern Rock and to say that banks need to hold more capital to protect themselves against future losses than they currently do.
He will not name a figure for the minimum, but Treasury sources say it is likely to be in the same ballpark as the 10% minimum proposed by the ICB.