If banks fail to implement a ‘ring-fence’ protecting their retail operations from the riskier activity of their investment arms, they could be forced to break up, completely separating the two areas.

The Vickers Report, produced by the Independent Commission on Banking, stopped short of recommending a full break up, but John Vickers warned yesterday at the Parliamentary Commission on Banking Standards that this option would be ‘kept in reserve’ if sufficient safeguards weren’t put in place to protect consumers.

He said: ‘If the industry turned out to be unreformable then it’s possible that total separation would turn out in due course to be the better step to take’, though there are fears that the threat of a full separation might encourage banks to leave Britain.

Find out more about possible reform and changes in the finance industry.

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