The government has confirmed its plans to force banks to ring-fence their retail operations, as well as other measures recommended by the Independent Commission on Banking (ICB).
Financial secretary Mark Hoban announced the proposals to the House of Commons this afternoon, as the Treasury published a white paper on issue.
They will require the banks to split investment banking and related activities from more traditional personal and business lending, with the later having oversight from an independent board.
However, they will still be able to offer simple hedging products, subject to the necessary safeguards.
As recommended by the ICB, high net worth individuals will be exempt from having to place their deposits in ring-fenced banks.
Meanwhile, banks with less than £25bn of mandated deposits will be exempt from having to implement the ring-fencing requirements.
Hoban said: "These proposals, while ambitious in scale, are proportionate in impact. They will promote financial stability while supporting sustainable growth and maintaining the UK's role as the world's leading international financial centre.
"The reforms we are announcing today, together with the changes we are making to the regulatory architecture, demonstrate that the government is determined to take action to deliver a stable and sustainable banking system that underpins, rather than undermines, economic growth."
With Basel III already set to increase banks' capital requirements to at least 7%, the government has also announced it will force the largest UK ring-fenced banks to hold an additional 3% of equity.
The government's proposed measures had already been leaked ahead of the formal announcement to Parliament and George Osborne is expected to comment on them further in his speech at Mansion House tonight.
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