By Marcus Leach

The news, announced by Chancellor George Osbourne, that banks will be ring-fenced has been welcomed by the Federation of Small Businesses (FSB).

Mr Osbourne has announced that the ring fencing of banks' trading arms will protect their branches, public savings and loans divisions should the trading arms run into trouble.

"The FSB welcomes the idea of ring-fencing the high street banks as this would help to provide the stability that the market needs and would help to keep everyday banking services running should another crisis occur," John Walker, National Chairman, Federation of Small Businesses, said.

"Ring-fencing will help to build confidence in the sector again, but ultimately, there needs to be more competition so that small businesses can get the best deal. Since 2000, the number of banks available for depositing cash has fallen by 20 per cent and so we urge the ICB in its final report in September to look at ways to allow new banks to get a foothold in the market and onto the high street.

"One way to do this could be through the sale of Northern Rock and so we urge the Chancellor to take action on this. Increased competition will also lead to the long-term stability that will benefit everyday customers, including small businesses and those looking to start up on their own."

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