Banking report

Retail banking services should be ringfenced within banks, the Independent Commission on Banking (ICB) has said.

The ICB's interim report, released this morning, aims to reform the banking sector to prevent a financial crisis like that of 2007, which led to the collapse of major banks and plunged the economy into recession.

The commission argued for a firewall to be created within banks, separating their investment activities from their high street retail practices.

This would protect customers' deposits and business lending from being threatened in any comparable meltdown and require banks raise capital from other sources.

The commission also found that the decision to allow Lloyds TSB to take over HBOS was a mistake and had limited competition. It recommended Lloyds should sell off more branches to reduce its market share.

The ICB will make its final recommendations in September.