By Simon Miller

The UK government has formally confirmed plans to ringfence retail banking away from wholesale operations.

In the Queen's Speech - which sets out the legislative programme for the latest Parliamentary sessions - the government said it would formally enact the recommendation of the Independent Commission on Banking to ringfence high street operations away from investment banking to prevent furthe state bailouts.

However, PwC financial services leader Kevin Burrowes warned that despite banks being prepared for this change, other problems would emerge as a result.

He commented: "Formally signalling intent to pursue ring-fencing helps eliminate uncertainty but, in reality, the banks are already well aware this would be pursued by the government. All banks are already undertaking enormous changes to their business models in light of trading outlook and pressure to generate acceptable returns for investors for the increasing capital that has to be invested."

"The emerging risk is that as the banks become regulated utilities, some banking activities may be pushed into the largely unregulated shadow banking sector. Fixing one problem while another begins to emerge must be avoided," Burrowes added.

In addition to the ringfencing, a depositor preference will be introduced to ensure that ordinary savings and deposit accounts are repaid first when a bank goes under and banks will be required to increase capital resources.

The bill will also aim to strengthen shareholders' power to reject excessive boardroom pay deals.

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