Britain is running the risk of bankers chipping away at Sir John Vickers' reforms until they are rendered useless, the Parliamentary Commission on Banking Standards was warned by the architect of the Volcker rule on America's regulatory reforms of banks.
Sir John's report called for retail banking operations to be "ring fenced" from more risky investment banking.
But Paul Volcker, the former chief of US Federal Reserve, said: "It (Sir John's report) says they are going to have a ring fence but they are going to have exceptions.
"Once you do this and you have exceptions the banks will say, yes well, let's make this one a little bigger because it is getting awkward."
Mr Volcker said Sir John's aims were the same as those contained in his rule, which bans US banks from proprietary trading, or using their own funds to place bets in the financial markets.
But he said: "Based on the American experience, the concept that different subsidiaries of a single commercial banking organisation can maintain total independence either in practice or in public perception is difficult to sustain. If you want to separate operations clearly and decisively you put them in different organisations."
Mr Volcker rounded on critics of his rule, notable among them JPMorgan's chief executive Jamie Dimon, who has railed against it in a long letter to his shareholders.
He said that the rule was only "about 35 pages" long with a similar appendix. The only reason it mushroomed to over 300 was as a result of needing to "answer questions put by lobbyists".
The rule is a key part of the US Dodd-Frank banking reforms, which Mitt Romney, the Republican Presidential candidate, has pledged to repeal if he wins election. Mr Volcker insisted that he was "not saying it (Sir John's reform plan) is not going to be effective" but he warned that it was "easy to put a lasso around the neck of a bank when it's nearly bankrupt, much harder when times are good".
He renewed an attack on the destructive culture and bonus practices banks had allowed to build up, saying they had permeated and polluted institutions leading directly to the aggressive selling of subprime mortgage loans to people who couldn't pay.
The commission is due to report before Chancellor George Osborne's plans for banking reforms are finalised.