Proposals to reform the banking sector by separating retail and investment arms have not been properly spelled out by the Independent Commission on Banking, MPs warned today.
An interim report by the ICB included "little detail" on its plans to force banks to ring-fence their retail arms, making it difficult to evaluate the pros and cons, according to findings by the influential Treasury Select Committee.
This led to concerns that suggestions for a full structural separation between the two types of banks had "not received sufficient analysis", it added.
The ICB's report, released in April, also suggested that Lloyds be forced to sell more than the 600 branches it had currently agreed with Europe to increase competition, and said that banks should be forced to hoard more money to make them more robust.
But the Treasury Select Committee said the report had "serious omissions" about how to improve corporate governance in the sector to encourage greater financial stability, while it also raised questions about how much its plans would cost customers.
The MPs have challenged the ICB, led by former head of the Office of Fair Trading Sir John Vickers, to address its concerns in its full report in September.
The Treasury Committee took evidence from the bosses of the UK's biggest four banks when coming up with its findings.
They warned that the ICB's structural reform options could potentially be costly and claimed that a retail ring-fence would contribute little to increased financial stability and may inadvertently increase risk-taking.
Committee chairman Andrew Tyrie said: "When the banks appeared before us, they articulated important concerns about the Vickers proposals.
"These are important objections and we believe Sir John needs to come out and demonstrate that his proposals would not have the negative or unintended consequences that his critics assert.
"A retail ring-fence would entail a huge change to the structure of the banking sector in the UK. Our long-term prosperity depends on getting this right."