On the day that MPs debate the Banking Reform Bill, the Parliamentary Commission on Banking Standards stepped up pressure on the Government to back recommendations from its first report not currently in the planned legislation.
The Chancellor's attempts to "re-set" Britain's banking system still do not go far enough, a panel set up following the industry's Libor-fixing scandal has said.
In particular, it wants more powers for the Bank of England to control how much banks can borrow, as well as for regulators to have the power to force a complete split of retail and investment banking operations.
Outlining the Bill in a speech in Bournemouth last month, Chancellor George Osborne pledged to introduce powers to "electrify the ring-fence" if lenders fail to split high street branch operations from the dealing floor. He said: "2013 is the year when we re-set our banking system. So the banks work for their customers - and not the other way round."
The Bill is based on the recommendations of the Independent Commission on Banking, which came up with ways to make the sector safer and give greater protection to depositors in the wake of the financial crisis.
However, the Parliamentary Commission on Banking Standards has also called for a further reserve power to break up the banks if they do not adhere to rules to separate investment and high street operations.
This would be exercisable only after independent review and with Treasury approval, but according to the Commission has been rejected over fears of giving too much power to financial regulators.
Commission chairman Andrew Tyrie said: "The Bill is certainly much improved. However, the Government rejected a number of important recommendations. The Commission has examined these again, alongside the Government's explanations for rejecting them. We have concluded that the Government's arguments are insubstantial. There remains much more work to be done to improve the Bill."
He added that the Government had also failed to address the panel's recommendation for a periodic, independent review of whether the ring-fence is doing its job. Bank of England governor Sir Mervyn King is among those in favour of this.
Labour said the latest report from the Commission made "for disappointing reading". Shadow Chancellor Ed Balls added: "It confirms George Osborne is continuing to duck the radical banking reform we need and which the cross-party commission has demanded."