The Independent Banking Commission will say that an internal firewall or protective barrier has to be put around the parts of a big or universal bank that are deemed to be vital to the interests of the economy (as I said on the Ten O’Clock News last night).

They are the parts of a universal bank such as Barclays, Royal Bank of Scotland and HSBC that would always be bailed out by taxpayers – and they include our savings, the mechanism for moving money around (what is known as the money transmission mechanism) and business lending operations.

The idea is to make sure that they could not be damaged as and when problems arise in other part of banks, such as the trading activities of banks.

However there are different ways of achieving this end – which would be more or less expensive for banks to implement.

Banks argue that the cheaper option would be to reinforce the operational separation of this kind of retail banking from their investment banks, with tighter legal separation into separate legal subsidiaries only occurring in a crisis, in a process called resolution.

In these circumstances there would be some increase in the costs of borrowing for banks – because it would be clear that taxpayers were no longer prepared to bail out everything they do in all circumstances, and therefore the risks of lending to banks would increase.

But because banks would retain the ability to deploy their capital across the range of their activities according to the returns they perceive to be available at any particular moment, the increase in their costs of doing business would not be – in their view – prohibitive.

The other option would be for the banks’ investment banking and retail banking operations to be forced to operate in independently funded and independently capitalised subsidiaries in good times as well as bad.

The banks fear that this would force them to raise a lot more expensive capital for each of their new subsidiaries and would also lead to a far greater increase in their borrowing costs. They claim such a structural reform would put them at a disadvantage compared to their overseas competitors.

However this form of subsidiarisation is widely seen to be a far more robust way of reducing a substantial implicit taxpayer subsidy for investment banking – the parts of the bank that trade on financial markets and advise the biggest companies on how to raise money – and also of reducing the probability that taxpayers would be called on to bear the enormous financial liability of rescuing an entire universal bank that runs into difficulties.

My understanding is that the Commission will present the options and initiate a debate.

As for the Chancellor, George Osborne, he will welcome the analysis carried out by the Commission, but he will not throw his weight behind any particular proposal to reform the banks until after the Commission’s final report is published in the autumn.