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Quizzed by the Treasury select committee on whether a narrow banking system would have prevented the financial services crisis, John Varley, chief executive of Barclays, said broader banks were generators of liquidity and there was no correlation between big banks and increasing likelihood of failure.

He said small banks tended to generate lower returns and failed more frequently and the conclusion he would draw from this faxt was that the system would not be best served by making big banks smaller but by making large institutions safer.

Mr Varley said what was clear following the financial crisis was there was no substitute for the culture and behaviour of a bank's board being sound and suppliers of capital to a lender holding them to account.

During the meeting on financial institutions deemed too important to fail, taking place this morning (9 February), Mr Varley said firewalls between investment and retail deposit taking should be considered.