As Britain tries to get a hold on its ever increasing mountain of debt a new commission, organised by the consumer group Which, has released a report providing a series of recommendations for the government to consider on the important issue of banking reform. The distinguished panel chaired by David Davis MP also included the newly appointed Business Secretary Vince Cable MP, the former chairman of the treasury select committee John McFall MP and a number of industry experts.

In the document the commission suggests that a systematic reform of the financial investment sector is indeed needed and that the separation of the banks is required to avoid a reoccurrence of the events that led to the global financial crisis. All of the major political parties have advocated tougher and stricter regulation in the financial sector, but so far little has been agreed upon due to the nature of global capitalism.

One particular issue that may cause a problem for the new coalition government is the idea of splitting up the banks. No business should ever be ‘too big to fail’ and many politicians now believe that it’s necessary to split financial institutes into separate retail, business banking and investment sections. The chancellor was at first reluctant to consider this, but it appears that the conservative front bench is coming under increasing pressure to take this notion forward.

One advantage provided by a separate retail/investment banking system would be the protection of current account holders. During the financial crisis a lot of innocent savers and savings accounts were put into jeopardy by the sub-prime mortgage crash, a separation within the system would prevent taxpayers from bearing the burden of the riskier investment firms hitting the wall.     

In an announcement yesterday George Osborne continued to press forward on the repatriation of powers from the FSA to the Bank of England, he also assured the audience that the coalition intended to complete “the process of reforming the regulatory system 2012.” Hold on to your hats folks, more will follow in the run-up to the emergency budget on the 22nd June.