Vince Cable blasts banks for using euro crisis to stave off reforms

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Business and industry groups have argued that a weak domestic economy and turmoil in the eurozone mean that banks should not be burdened with extra regulation.

They have stepped up their lobbying efforts ahead of the publication of a key government-commissioned report on the industry on September 12.

"It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen," Cable told The Times newspaper.

Cable, a member of the Liberal Democrat coalition party, has long argued for a full separation of banks' operations, going further than the ring-fencing which the Independent Commission on Banking (ICB) is expected to propose.

"The Governor of the Bank of England and many other people have been arguing that we have to deal with the too-big-to-fail problem," Cable added.

"We can't have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer: this can't go on and it has got to be dealt with," Cable added.

Finance minister George Osborne, from the larger Conservative coalition party, has indicated he will support the ICB proposals although banks could be given until 2019 to implement changes.

The big issue to be clarified in the report is how far the ICB, led by John Vickers, will go with its proposals for ring-fencing retail banking.

Britain wants to ensure that it does not suffer a repeat of the financial crisis of 2008-09 when the state had to spend billions of pounds preventing the collapse of Royal Bank of Scotland and HBOS, now part of Lloyds. The state has an 83 percent stake in RBS and owns 41 percent of Lloyds.