Shares in Britain's biggest banks fell sharply as markets digested reports that George Osborne will back plans to force lenders to "ring-fence" their retail banking businesses

The Chancellor will give his public support in his Mansion House speech tonight to proposals from the Independent Commission on Banking (ICB) that will mean in the event of a future crisis the authorities will be able to seize the retail arm of a troubled institution.

Shares in Barclays, Royal Bank of Scotland, Lloyds Banking Group, HSBC and Standard Chartered dropped between 0.9pc and 1.9pc, dragging the FTSE 100 index of leading shares down 0.5pc.

Adding to the pressure on the sector was a call from Lord Lawson, the former chancellor, for the government to go further and fully separate the retail and investment arms of Britain's banks.

"The problem with this is while it is intellectually a sound move, the problem is that in practice, with the pressures of the real world, the ring-fence will not actually - to mix metaphors - be completely watertight. It might break down. It's very difficult when you've got the same management, the same board, the same group of shareholders," he told BBC Radio 4's Today programme.

In his speech, the Chancellor will call for the need to.....Click HERE to read more on this story