by business editor Trevor Sturgess

Banks must not be allowed "wiggle room" to get out of major change, according to a consumer watchdog in the wake of a major banking review.

The first report of the Independent Commission on Banking, chaired by Sir John Vickers and published today, received a generally favourable reception, with most commentators backing its key recommendation to ring-fence consumer banking from so-called "casino" operations.

The commission was set up in the wake of the financial crisis triggered by banking failure and the subsequent taxpayer bailout of RBS and Lloyds Banking Group.

Which? said competition on the high street was at an all-time low and the financial crisis had increased the market power of the three largest banking groups, with two having to be bailed out, and the other - Barclays - receiving a lot of complaints over customer service.

Which? chief executive Peter Vicary-Smith was worried that the recommendations "will not go far enough to address the parlous state of competition in the UK".

He said: "We welcome the intention to ring-fence the retail banking services we rely on every day, but banks mustn't be allowed wiggle room to avoid fundamental change.

"Banks must be allowed to fail without bringing down the rest of the economy and we must never again be faced with a situation where consumers pay the price for the failures of the banking system."

Employers' organisation the CBI warned that ring-fencing would have a significant impact on the UK's financial landscape.

It would need to be carefully assessed "to ensure that they allow banks to support businesses and growth, and strengthen this country's position as a leading global financial centre".

The British Bankers Association was naturally cautious, saying the proposals would have to be considered alongside other reforms already underway.

But it accepted that banks "like any other company must be able to fail and not assume the tax-payer will step in".

The Commisssion also recommended that Lloyds should sell off hundreds of branches.