Alistair Darling: We won’t follow Obama’s move on banks

The Chancellor's office made clear the Government would continue with its own measures to prevent banks from gambling in high-risk sectors with depositors' money.

Shares in Barclays fell eight per cent as the markets reacted to President Obama's announcement. RBS shares also fell eight  per cent and there were falls across Europe as investors feared the Obama agenda might be copied in the EU.

The US President last night stunned the financial world by promising proposals to split commercial banks from investment banks, declaring that he was ready for a "fight" with Wall Street over the issue.

Shadow chancellor George Osborne said: "This is a welcome move by President Obama that accords very much with our thinking. I have said consistently that we should look at separating retail banking from activities like large-scale propriety trading — and that this was best done internationally."

He compared it to the Conservatives' plans to break up banks deemed "too big to fail" and said Gordon Brown was "isolated" in opposing such reforms.

But Mr Osborne left himself room to back away from the Obama package later by saying that it could only work if there was international agreement and warning against "crude" rules.

Mr Darling will use a looming G7 summit to push Britain's proposals for an alternative style of crackdown. He wants the Financial Services Authority to require banks that gamble to hold huge deposits as a cushion against things going wrong.

Secondly, there would be firewalls between deposits and investments. If the FSA deemed walls to be too weak, the bank would be told to split up. A  source close to Mr Darling said: "We are confident in our proposals and felt that George Osborne was backing away as hard as he could from his old position this morning."

Lib-Dem Treasury spokesman Vince Cable said: "Barack Obama understands that the bonus culture in the banking system ... must be curbed."