Pressing ahead with a string of reforms to strengthen financial system, the Bank of England (BOE) has asked banking groups to separate their retail activities from commercial banking.

The ring fenced retail banks are also required to have a separate chief executive officer and chairman and the ability to keep operating even if its parent or other parts of the group fail.

The proposed rules will apply to any bank with more than £25bn in deposits from individuals and small businesses.

The UK’s central bank has asked banks submit their ring-fencing plans by 6 January 2015, which must be implemented by 2019.

THE BOE said that further details on funding and capital at ring fenced banks will be given next year.

The BOE also unveiled new proposals for customers to receive 100% compensation for certain forms of insurance in the event of an insurer collapsing. Previously, customers were only covered up to 90% for annuities and life or incapacity insurance.

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Also, the BOE raised protection under the Financial Services Compensation Scheme from a maximum of £85,000 to as much as £1m to cover those briefly holding large amounts in their bank account.

Under the new proposals, customers would still be able to withdraw cash and send money, but these transactions would come from their new bank.

"These proposals aim to facilitate effective and prompt payment of compensation, to improve depositor confidence and this minimise the likelihood of a run on a deposit-taker," the Bank of England said.