By Marcus Leach

Financial Secretary Mark Hoban has unveiled a White Paper on banking reform that will see savers given greater protection if a bank fails.

The government proposals follow recommendations made by the Independent Commission on Banking (ICB), which was set up to ensure the UK banking system was fair.

Shadow chancellor Ed Balls criticised the Chancellor, George Osborne, for not making the statement himself, as was originally planned.

Chief amongst the proposals outlined is the ring-fencing of High Street retail banking operations from riskier operations such as investment banking.

However, the British Bankers' Association has warned that any such reform would damage the banking sector, and further to that have a significant knock-on effect on the overall economy.

In his speech, to be delivered at lunchtime, the Chancellor will say: "We've got to stop problems here in the City of London spilling onto our High Streets and putting taxpayers' money at risk.

"The government will ring-fence retail deposits from the risks posed by international wholesale and investment banking. A ring-fenced bank will be economically and legally separate from the rest of the group and run by an independent board," Mr Hoban told the House of Commons.

"We felt that it was in the interests of business to ensure there was a wider range of instruments included in the ring-fence, including derivatives.

"These products are widely used. There is a need for them."

John Longworth, Director General of the British Chambers of Commerce (BCC), said that transparency and improving competition must be at the heart of banking reforms.

“Sustainable economic growth means strengthening the UK banking system. However, addressing the problems of bank lending to businesses relies upon the government putting transparency and improving competition at the heart of any reforms," he said.

"While the difficult relationship between businesses and banks won’t be fixed overnight, progress relies on reforms that will support enterprise and growth. Businesses need the ability to switch easily between banks, access to clear and transparent products and more choice between providers.

“A more competitive lending environment can only be achieved if those responsible for implementing reforms treat the nitty gritty of account switching and direct debit redirection as seriously as they do the ring-fencing of retail operations.

"When dealing with big changes to the regulatory framework for an industry of such massive size and scope, the guardians of change need to ensure that smaller measures to promote competition do not get lost behind the bigger headline-grabbing measures. Only then will we come close to achieving a good deal for business customers."

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