Banks need to radically simplify their structures and provide more information about what funds they would use in an emergency, the Deputy Governor of the Bank of England said today.

Mr Tucker’s call was backed by Neelie Kroes, the EU Competition Commissioner, who warned that there was no money left for a second bailout of the banking system and called for a new market structure.

Speaking in London at the British Bankers' Association International annual conference, Paul Tucker said there needed to be “a radical simplification” of some banks' structures to minimise risk to the financial system but acknowledged that it "will not be easy."

However, Mr Tucker said it was "important to bring about the kind of regime shift necessary to restore confidence and trust in the industry without a government prop".

Mr Tucker said that banks should also inform central banks about what they would do if they got into distress. "We need to engage together constructively on what information the authorities need to handle incipient or actual distress."

The Bank of England is in favour of a pre-funded insurance scheme to quickly refund retail depositors in the event that a bank goes bust.

Mr Tucker outlined why the Bank preferred this system. "Any such scheme must be pre-funded; it is no good trying to collect levies from riskier banks after they have gone bust," he said.

Mr Tuckers' comments come just days after Mervyn King, the Bank Governor, hinted at tensions with the Treasury when he told MPs that he had not been consulted over imminent proposals to shake up banking regulation.

Mr King also agreed with Conservative MPs on the influential Treasury Select Committee that the system of bank regulation is “a mess”.

Speaking at the same conference, Ms Kroes said that the EU will demand major changes to British banks in return for approval for state bailouts.

“I’ve already met with two dozen bank chief executives and my starting point is a pragmatic approach to fixing this mess,” said Ms Kroes, who is responsible for ensuring a level playing field across the 27-country European Union.

“But I appeal again to your self-interest. There can’t be a second bailout.”

Ms Kroes said that the partly nationalised Royal Bank of Scotland and Lloyds Group may have to sell a large chunk of their assets to comply with EU antitrust rules.

“The massive aid received by banks such as Lloyds and RBS allows these banks to remain leaders on markets which are concentrated,” she said.

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