Several City stalwarts including Barclays and the Royal Bank of Scotland (RBS) claimed that banking would not be made safer by hiving off their investment banking arms in an effort to protect retail deposits.
State-supported RBS also said that by sharing funding sources and back offices with NatWest, the group manages to save between £3.5bn and £4.8bn each year.
The commission has heard from 150 experts and interested parties on how the industry should be reformed to avoid another state-funded bailout and boost competition.
Most respondents said the new Basel III rules did not go far enough to regulate financial powers.
But the banker who orchestrated RBS’s £20bn expansion in 2000, former chief executive and chairman George Mathewson, called for the UK government to force RBS and Lloyds to dismantle their current structure “in the interests of competition”.
ICB head Sir John Vickers has not explicitly recommended a full break-up of the banks but has said he would consider forcing greater segregation between retail and investment banking arms.