The Parliamentary Commission on Banking Standards has published its first report, recommending "electrification" of the ring-fence proposals.
In June, a report by John Vickers recommended a ring-fence between retail and investment banking to protect consumers from heavy investment banking losses.
Today's report is Parliament's own inquiry into banking standards following the Libor scandal. Chairman of the commission Andrew Tyrie MP agreed the ring-fence idea would make the banking system more secure and would help address the damage done to culture and standards in banking. However, he felt the proposals should go further as he feared they would not work in the long-term.
Mr Tyrie said: "The proposals, as they stand, fall well short of what is required. Over time, the ring fence will be tested and challenged by the banks. Politicians too could succumb to lobbying from banks and others, adding to pressure to put holes in the ring fence.
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"For the ring fence to succeed, banks need to be discouraged from gaming the rules. All history tells us they will do this unless incentivised not to. That's why we recommend electrification."
The commission also wants a reserve power for full separation which would provide incentives for the banks to comply with the rules of the ring-fence.
Commenting on the report, Matthew Fell, CBI director for competitive markets, said: "It is important that banks implement the ring-fence fully. Whilst the threat of full separation might help to concentrate minds, such a move would be detrimental to business, preventing them from accessing the full range of services they need from a single provider.
"Having addressed the important question of structure, the Commission should now shift its focus to driving a culture change where the customer is front and centre of everything that banks do, where increasing competition should play a major part."

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