Cable renews call for bank separations

Mr Cable used a speech in London yesterday to set out a series of tests which must be met before he will give his backing to proposals for a “ring-fence” to isolate retail and investment activities within the same institution.

He insisted that the Government would not come to a “firm conclusion” on the issue until after the final report of Sir John Vickers’ Independent Commission on Banking in September.

But he accepted that if his tests are met and the Vickers Commission shows that ring-fencing can be as effective as full separation at lower cost, “then that, I am sure, is the direction we will go in”.

Mr Cable made clear that there was no question of retaining the status quo, which was blamed for aggravating instability at the time of the financial crisis of 2008.

And he said that the Government will act quickly to implement change as soon as possible after the publication of the final Vickers Commission report.

Mr Cable has been a long-standing advocate of splitting banks to avoid a repeat of the taxpayer-funded bailouts of institutions deemed “too big to fail”.

He also suggested that Mr Osborne’s comments did not represent the Government’s final judgment on the issue.