The Government is to "accept in full" radical plans to shake up the banking industry despite fears the measures will harm the economy, Business Secretary Vince Cable said.
A report by the Independent Commission on Banking (ICB) that proposed lenders should be forced to split their retail and investment banking arms to help prevent future bailouts will be backed by Chancellor George Osborne in Parliament.
Mr Cable told the BBC's Andrew Marr Show that the Government was "going to proceed with the separation of the banks".
But with the planned reforms estimated to cost the industry up to £7 billion, there are fears they will slow lending at a time when the economy is in danger of sliding into recession. And the moves will heighten speculation that banks, particularly HSBC, will move their head offices away from London, depriving the UK of jobs and tax revenues.
Mr Cable told the programme: "We have accepted the recommendations of the commission. It is absolutely right that we make the British economy safe. We just cannot risk a repetition of the financial catastrophe we had three years ago. Big structural reform of the banks was something we (Liberal Democrats) fought for and argued for and now it is going to happen."
Mr Osborne is to give a statement to Parliament, after the Treasury publishes a detailed response to the report, which includes plans to force banks to hold more capital to help protect them against future crises.
He is expected to pledge to enact all primary and secondary legislation stemming from the report by the end of the current Parliament, with a white paper expected next year, according to newspaper reports. The reforms should be in place by 2019.
The Chancellor has come under pressure to water down the proposals from bankers, who claim they are unnecessary and could lead to higher costs for customers.
The Treasury is expected to confirm the ICB's estimate that the plans could cost banks between £4 billion and £7 billion, although industry sources have claimed the true cost could be as high as £12 billion. It is expected that the Treasury's report will not go as far as spelling out how the ring-fence will work in practice and will leave the detail to regulators.
The ICB, chaired by Sir John Vickers, former head of the Office of Fair Trading, was set up by the coalition Government last year to conduct a full review of the sector after the financial crisis four years ago left banks including Royal Bank of Scotland and Lloyds needing bailouts.