The man in charge of Britain's financial stability has warned MPs that current plans to make banks safer don't go far enough and said they may need to be threatened with compulsory break up to force their compliance.
Speaking to the Parliamentary Inquiry into Banking Standards, Andrew Haldane, the Bank of England's executive director for financial stability, repeated a call for limits on banks' size to be considered and said they should be threatened with being torn apart if they seek to cheat a ring fence of their retail operations.
He also said the ring fence, recommended by Sir John Vickers' Independent Commission on Banking, should be implemented fully.
He added: "We [the Bank of England] are strongly of the view that full and faithful implementation of Vickers would be a significant and positive step. There are questions about whether it would be sufficient. I would prefer a clearer ring fence in a different place."
This, he said, would involve the retail-banking arm having a separate board, policies and even human resources department to prevent "cross contamination" with riskier investment banking.
And if such a ring fence failed, he said, the banks should be broken up
"If the ring fence doesn't work, as a plan that would be the next step. That strikes me as a clever way of implementing Vickers. The only reason banks would be against that is if they planned to work around the ring fence. For those who don't plan to do that it [the threat] is costless. For those that do, it would put them back in the box," he said.
On size limits he has repeated his suggestion that a top size of $100bn (£62bn) would be a healthy maximum size for a bank's balance sheet. Barclays, for example, is about $1.5trn.
"There are a lot of people in the US arguing for size caps," he pointed out.
Mr Haldane told MPs that too-big banks ultimately prove detrimental to the economy. The Bank of England has repeatedly stated its unhappiness with those that are "too big to fail".
Mr Haldane also called for a central, shared banking platform to be developed by banks which would allow consumers to switch accounts with little or no difficulty and castigated banks for shoddy IT systems which put their customers at risk if there is a meltdown.
"We need a full evaluation of the costs [of a single banking platform] which we have not had. My personal view is that no change is not an option. Fully 70-80 per cent of the IT spend of banks is about maintenance of legacy systems. Many are antiquated. We only need to think back to the unfortunate events at RBS to see the cost of this."
That was when customers found themselves locked out of their accounts after an IT failure. While for most the time taken to fix the problem was short, some Ulster Bank customers had to wait weeks.
"The time is overdue for something of an IT transformation. It is one of the real peculiarities that banking, which is an infrastructure industry, has not invested more wisely in IT to improve the customer proposition."