The government on Monday gave its formal approval to plans to ring-fence the country's top retail banks from their riskier investment banking arms, in order to give better protection to taxpayers in case of future financial crises.
The government will separate retail and investment banking through a ring-fence, Finance Minister George Osborne told parliament.
Osborne was giving his formal approval to plans laid out in September by the Independent Commission on Banking (ICB), which had proposed this ring-fencing model.
The ICB also said banks should hold core capital of 10 percent, plus a further 7-10 percent capital in the form of bail-in bonds.
There would also be limits to the extent to which a bank could use money in its retail arm for its investment bank, a move that will increase funding costs for British lenders.
(Reporting by Steve Slater and Sudip Kar-Gupta; Editing by David Hulmes)