The Independent Commission on Banking has recommended UK banks' retail operations should be "ring-fenced" from their investment banking arms.
In its interim report, the commission also says Lloyds Banking Group should sell off more of its branches in order to increase competition on the high street, the BBC reports.
However, it falls short of recommending the separate arms within the banks should be completely split up, although it criticises lenders and borrowers for taking on “excessive and ill-understood risks” in the build-up to the financial crisis.
The report said the ring-fenced operations should hold more capital than currently required, suggesting a 10% core tier one ratio.
The report also suggests creditors not taxpayers should be liable for any losses.
Its final report will be published in September.
