Business Secretary Vince Cable has dismissed the costs to the banks over the implementation of Sir John Vickers’ Independent Commission on Banking.
The report, which calls for a structural separation between the retail and investment arms of UK banks, is designed to prevent a repeat of the taxpayer-funded bailouts, which included Lloyds and RBS.
Within the report, Vickers suggests a deadline of 2019 for the changes to be enacted. Following publication, the chancellor was quick to seize upon the timetable, which gives banks more than seven years to introduce the measures.
"John Vickers himself sets out a timetable and I intend to stick to his timetable,” said Osborne. “There are a lot of changes involved so this will take some time."
The ICB has said the new regulation could result in a cost of between £4bn and £7bn for Britain's banks
However, speaking earlier today on the BBC, Vince Cable dismissed these costs to the sector. He said:
“There are costs to the bank are that’s entirely right as we’re making them safer in the national interest. The benefits to the economy of having a safe system of banking… the benefits of these reforms far exceed the cost to the banks. Of course the banks have got very lavish payments and dividends and that’s how they make economies.
“The report is clear that we need a strong ring-fence so we don’t have the problem of the past of retail banking - UK households and businesses - being mix up with investment banking casino operations."
Speaking to parliament, Osborne said: "The government wants Britain and the City of London to be the pre-eminent global centre for banking and finance. We want universal banks headquartered here with all the advantages that brings."
Alongside the proposed ‘ring-fencing’ the report also recommends steps to “promote effective competition, in which banks compete to serve customers well rather than exploiting lack of customer awareness or poor regulation".
This competition is to be encouraged through a series of measures, including a proposal to make the switching of accounts between banks a far smoother process.
The report also recommends providing customers great transparency across the sector, including an annual statement detailing the costs of having an account.
Vickers also endorsed the establishment of a new High Street operation to further encourage competition.
Shadow Chancellor Ed Balls said he agreed with the Independent Commission’s findings but also suggested that some of the reforms could be speeded up.
“These are radical proposals, but they’re right,” he said. “In terms of the ring-fencing, I back the commissions timetable. On competition, which is actually vital to stop consumers and businesses paying for these reforms, I think the Commission and George Osborne are going too slowly.”
Following George Osborn's address to the Commons, the shadow chancellor suggested that an independent report should be commissioned for twelve months time to detail the progress of the recommendations detailed in the Vickers Report.
Writing in the Mail on Sunday, Cable warned the banks the recession was "not an excuse for postponing banking reform".
Vickers said that his reforms were "fundamental and far reaching" but dismissed fears that the changes would cause banks to flee London to escape the new regulations.
"One of the merits of the ring-fencing idea is by securing UK domestic banking in that way we can have international standards apply to the international operations of the banks," he said on Monday.
The Confederation of British Industry (CB) has warned the government not to press ahead with the proposals too quickly.
"The UK is going it alone on ring-fencing, so the government must rigorously examine how and when to implement these proposals, otherwise it risks damaging businesses and threatening growth," the CBI said.
While the Unite union said the ICB report was a missed opportunity and was nothing more than a "weak gesture".
The union said: "The glaring omissions on workforce engagement and meaningful changes to remuneration systems within banking means that this report is another missed opportunity in preventing a repeat of the financial crisis in the future.
"Simply creating a firewall is, at best, a weak gesture and, at worst, a pointless act which will not in any material way impact the behaviour or culture at the top of the banks where this crisis was born."
And Labour MP John Mann, a member of the Commons Treasury Committee, also attacked Vickers for failing to consider building societies
"Banks are modelled to respond to share holder pressure and this used to be countered by the stable presence of the building societies when they represented more than 30% of the market place," he said.
On Sunday, Labour leader Ed Miliband unveiled a plan to introduce a code of conduct into banking which will allow bankers to be struck off in the same way as doctors.
Miliband also called for greater transparency on pay and bonuses and more competition in the industry to encourage lending to small businesses.
He said that banks and the government needed to learn the right lessons from the financial crisis to ensure it did not happen again.
''We must not send a signal to banks or any other institution that they can go back to business as usual, particularly at a time when the hard-working majority in this country – who were not responsible for creating the crisis – are being asked to pay the bill in terms of Tory VAT rises and cuts in public services," he said.
He said: ''The Vickers commission therefore should be seen as a first stage of reform not an end-point. There will still be an unfinished revolution in this industry even when its recommendations have been implemented."
"The need for a significant mutually owned share of the banking industry is paramount and the Review has missed the point by not addressing this”.