Chancellor George Osborne has given the go ahead for reforms to the banking system.

The news comes after Business Secretary Vince Cable told the BBC's Andrew Marr show on Sunday that the Chancellor will accept in full the 'Vickers Operation' put forward by the Independent Commission on Banking (ICB) in September.

The Chancellor said that the reforms will be implemented in stages, with the full package of reforms to be completed by 2019. A white Paper will be published in spring 2012 setting out further detail on how the recommendations will be implemented.

The proposals, led by Sir John Vickers are designed to reduce the risk of a repeat financial crisis, to create a self-reliant banking system so that the taxpayer does not have to foot the bill, and to increase competition amongst banks.

Perhaps the most controversial proposal is the ring-fencing of a bank's retail arm from its wholesale and investment banking arm. Benefits of separating the two units include making it easier and less costly to sort out banks that get into financial trouble, without calling on taxpayers, insulating vital retail banking services from global financial shocks, and increased competitiveness.

A ring-fence would, the report argues, be more cost-effective than total separation, and can provide the same benefits. But the measures were met with concerns from banking groups, claiming that they would be costly to implement and as a result have a negative impact on lending.

Other reforms outlined in the report include measures to boost competition, particularly in the current account market. As a result, competition will be made central to financial regulation by giving the new Financial Conduct Authority a clear duty to promote effective competition.

Commenting, Osborne said:

"The Independent Commission on Banking was set up last year to look at what I have called the ‘British Dilemma': how Britain can be home to one of the world's leading financial centres without exposing British taxpayers to the massive costs of those banks failing.

"The Government is preparing the most far reaching reforms of British banking in our modern history - our objective is to make sure what happened in Britain never happens again."