Britain's big banks will need to hold billions of pounds of extra capital when they have to separate their domestic high street banking operations from risky areas, the Bank of England has said.

New rules to be introduced from 2019 will require British high-street banking operations to be 'ring-fenced' from the rest of the bank, effectively treating it as a separate company. The aim is to better protect taxpayers in the event of a crisis.

The BoE said in a consultation paper published today that the changes would require the affected banks to hold between £2.2 billion and £3.3 billion of extra capital.

That is based on the BoE's estimate of how ring-fencing will reduce group-wide diversification benefits and could result in more concentrated geographic and sector risk, requiring firms to hold more capital in reserve.

The aim is to ensure banks' day-to-day business of running personal and small firms' bank accounts is safe from riskier activities and to ensure the former continues in any crisis.

The ring-fencing rules will affect any bank with more than £25bn of deposits. That is expected to include HSBC, Lloyds, Barclays, Royal Bank of Scotland, Santander UK and Co-operative Bank.