Sir John Vickers, chairman of the Independent Commission on Banking (ICB), is reportedly ready to defy the big banks and impose tougher than expected "ring fencing" of their retail and investment banking activities when he presents his report on 12 September.
Now in the final stages of completion – the main text is thought to be complete – the Vickers Commission's proposals are likely to spark renewed anger among the banks, and increasing talk of them moving away from the UK.
However, the new tough line is likely to be welcome to Business Secretary Vince Cable, who has long campaigned for a complete legal separation of the functions of the banks, to eliminate the "too-big-to-fail" problem of their blackmailing taxpayers into rescuing them when they run into difficulties. Sir John's approach might also find favour in the Bank of England. The Governor, Sir Mervyn King, has made little secret of his scepticism about the benefits claimed for so-called "universal" banking.
Conversely, a tougher set of recommendations might not be so pleasing to Chancellor George Osborne. In his Mansion House speech in June, Mr Osborne went unusually far in endorsing the interim report of the Vickers Commission, which proposed a lighter ring-fencing than the one now rumoured to be approaching Treasury officials.
Having supported the first set of ideas so enthusiastically, Mr Osborne may now find it tricky to extricate himself. The ultimate decision over the future of banking in the UK, however, rests with the Government, and he may find allies at No 10 for his resistance to take risks with a major export earner and provider of jobs.
Senior bankers have warned that a ring-fenced structure could drive up the cost of borrowing, and reduce the UK's competitive advantage.