The Bank of England had set a deadline for the UK's biggest banks to submit initial proposals on separating their retail and investment banking activities in order to protect taxpayers from the banks' riskier investment activities.
Ring-fencing the high street operations was recommended by the independent Vickers Commission, which was formed during the first year of the coalition government, reports The Guardian.
The banks although have time till 1 January 2019 to adhere to the rules, they have been urged to show their initial plan to the Bank of England by Tuesday.
Banks will be compelled to scale back their investment banking arms considerably and embark on fresh reviews of their strategies.
The deadline is expected to affect HSBC, Barclays, Santander’s UK arm, the Co-operative Bank, Lloyds Banking Group and Royal Bank of Scotland.
The banks have to separate their risk-management and IT operations and have been urged to establish a boundary around their retail operations in order to protect customers from making any bailouts, which was seen during the financial crisis of 2007 to 2009, reports Reuters.
In response to the deadline, KPMG financial regulatory centre of excellence EMA head Giles Williams said: "The business models for UK banks are not homogenous. Given they are all different, the real challenge is to find what works for them, while also complying with the spirit of what was proposed in the Vickers legislation to protect taxpayers and make sure that customer interests are met.
"This means that the regulator must closely analyse the options to ensure that we don’t end-up with a ‘one-size-fits-all’ solution. If the solution proposed by each are not considered carefully, it will adversely impact industry innovation, and ultimately, the end customers.
In order to comply with separate European Commission ring-fencing proposals, the UK banks may have to split themselves in three buckets.
This is expected to be unhelpful in terms of added complexity and also from a competition perspective.
"With this in mind, I hope the policymakers in Brussels will consider and adopt a pragmatic approach to finding an answer that balances the interests of customers, shareholders and society more generally."