The British Bankers' Association has called for the Independent Commission on Banking's proposed reforms to be delayed until the economy has recovered and taxpayers have been repaid for bailing out the banks.
Angela Knight, the BBA's chief executive, said markets and economies were now more fragile than when the ICB published its preliminary report in April, and imposing costly reforms on lenders risked denting confidence and cutting the supply of credit to the economy.
Ms Knight said: "We have a high degree of uncertainty, market turbulence and lack of confidence that governments in other countries have got a sufficient grip on their economies. We are in for a very difficult autumn.
"This is therefore the time to concentrate on economic recovery and paying back... the government and taxpayers. By all means think about new regulation but now is not the time to add that as an overlay with respect to costs, uncertainty or whether it is going to do anything beneficial anyway."
The BBA's intervention comes two weeks before the ICB publishes final plans for increasing stability and competition in UK banking. It will then be up to the Chancellor, George Osborne, to decide whether and at what pace to implement any reforms. The commission's main proposal was to "ring-fence" retail and investment banking operations to separate essential functions from trading. The ICB did not say how it would make the separation and the banks are anxiously awaiting details.
Ms Knight said the ICB must set out options with its workings so that proposals can be debated, a process that could further slow implementation. "Before any formal actions are made, what one requires is a series of options including things that are already in train such as the new Basel rules, European requirements and recovery and resolution plans and the costs and impacts of a series of options put forward by the ICB. Then there is a debate about a series of options – what can we put to one side, what shouldn't be done at all and what has been done already."
With the share prices of Royal Bank of Scotland and Lloyds Banking Group languishing well below the prices the government paid for its stakes, deferring the ICB's changes until taxpayers have been repaid could take years. Ms Knight denied the BBA was using the argument to ward off reform.
The Chancellor faces pressure within the Coalition to be tough on banks. The Business Secretary, Vince Cable, recently renewed his call for lenders to be split up so that retail and investment banking do not sit under one roof.
Colin McLean, chief investment officer at SVM Asset Management, said: "The Coalition wants to change the retail banking model but there has been a degree of regulatory forbearance going on recently. The [ICB] will be robust and not easily swayed politically, but its proposals might not all be implemented afterwards."