Senior Conservative MP, David Davis – Chair of the new coalition Government’s Future of Banking Commission – has called for banks to be broken up in order to guarantee customers' savings. Speaking over the weekend on the BBC’s political flagship programme, The Andrew Marr Show, Mr Davis outlined the recent findings of the cross party commission, produced in partnership with the consumer group Which, saying that another financial crisis could break Britain.

"In Britain, banking sector assets are five times the size of the GDP, a ratio greater than the USA, Canada or the Eurozone,” Mr Davis warned. “Getting it right is more important here than anywhere else because the next crisis may be bigger than the British economy can afford."

The Future of Banking Commission’s key recommendations include:

• Regulation should have the objective of increasing competition among banks.
• Banks should draw up "living wills" that would make it clear that retail customers would at the front of the queue for help in the event of an institution's failure.
• Ending the mixture of all types of trading with corporate and investment advice.
• The separation of 'safe' retail activities and riskier 'investment banking'.
• The existing £50,000 depositor guarantee should cover multiple deposits within the same bank if they are left with different 'brands'. For example a person with deposits with Abbey and Alliance & Leicester - two institutions owned by Santander - currently would only receive cover for a maximum of £50,000. Under the commission's recommendations deposits under both brands would be covered.
• 'Safe haven' accounts should be introduced where full refunds are possible but the returns are meagre.
• The establishment of a professional standards body - modelled on bodies like the General Medical Council and Legal Services Board - that would establish ethical and professional standards for bankers. The body would train bankers in these standards and investigate failures to uphold them.
• Remuneration of bankers should be proportionate to longer-term measures of performance. The report suggests share value over a decade, for example, and also customer satisfaction and complaint levels.
• Frontline staff should no longer receive commission for sales.

Mr Davis told Andrew Marr that many of the recommendations would only really work if part of an international agreement that included the USA, in particular. “Sixty years without a crisis under Glass-Steagall; and in ten years, bang, we have the biggest crisis since Glass-Steagall,” he said. When asked if the Commission would like to see is all the big banks broken into the separate investment and retail arms, Davis answered that although the detail is difficult, “…there are about five things you achieve through breaking up the banks. I mean you protect the taxpayer, you protect the depositor, you stop the conflict of interest. So the detail of how you do it, I expect this government commission to come up with,” concluded Davis, “but broadly speaking - yes, you've got to have that separation.”