But the report by Sir John Vickers gives banks a degree of flexibility in implementing the ring-fence which was not detailed in the interim report.
It says that certain operations, such as saving deposits and overdrafts, must be included within the ring-fence, and certain services, such as derivatives trading, must be outside the ring-fence.
However, it says that other services, such as lending to large companies outside the financial sector, should be permitted but not required within the ring-fence.
The report also says that Lloyds Banking Group only needs to sell off 632 branches as previously agreed with the EU, thereby back tracking on a recommendation in the interim report that the lender sell off considerably more branches than the agreed 632.
In addition, the ICB confirmed that large retail banks should have equity capital of at least 10% of risk-weighted assets, while the retail and other activities of large UK banking groups should have primary loss-absorbing capacity of at least 17-20%.
The report says implementation of the reforms will be completed by the start of 2019 at the latest.
In response to the report, the British Bankers’ Association said in a statement: “UK banks are well on the way to implementing the sweeping reforms already brought in and expected to be brought in by UK, EU and global authorities to make banks and the system safer and to ensure that banks can fail in the future with savers and taxpayers protected and the supply of finance to the economy maintained.
“The ICB’s recommendations cover the same important issues. Any further reform measures adopted by the UK authorities need to be carefully analysed and compared with those agreed internationally.
“It is vital that the full impact any further reforms will have on the economy, the recovery and banks’ ability to support their customers in the UK is understood.”
The Building Societies Association says it welcomes the ICB’s recommendations.
Adrian Coles, director-general of the BSA, says: “We welcome the ICB report which if implemented will make the banking system in the UK both more stable and competitive. The ring-fence proposals appear both sensible and proportionate.
“Our hope now is that the government will move ahead with these recommendations and at the same time use it to do what they promised in the coalition partnership agreement and bring forward detailed proposals to foster diversity in financial services and promote mutuals.”