Cridland backs banks as he claims business would be hit by break-up

John Cridland, who took over from Richard Lambert this week, said: "Businesses value integrated services provided by large universal banks, so breaking up existing banks is not the way forward."

The CBI also warned of the dangers of Britain going it alone on banking reform and undermining the City as an international business centre.

In its submission to the government-appointed Independent Commission on Banking, it said: "Instead, structural reform should focus on establishing the necessary capital buffers, having effective recovery and resolution arrangements, and appropriate supervision."

The CBI said the introduction of so-called "living wills" to help the orderly winding down of distressed banking businesses would also help "separate activity and ensure that core banking services can continue in the event of a crisis".

Royal Bank of Scotland, HSBC and Barclays are among those that have argued against splitting investment banking and retail banking operations.

Sir John Vickers, chairman of the ICB, hinted in a recent speech that the commission was inclining away from recommending a formal break-up of the banks, but with stronger ring-fencing of their respective capital needs.

Cridland said business wanted a competitive, resilient financial sector. But he said the CBI's soundings amongst its medium to large member organisations showed they were in favour of universal banking.

He cited as advantages of the universal banking model "companies wanting to get away deals, trying to break into new markets or considering alternative financing options".

Any "dramatic" break-up of these banks "from a business point of view would be a mistake", Cridland added. He said Vickers's recent speech indicating his thinking on the subject before the ICB publishes its full proposals next September was welcome.

The CBI gave the illustration of a company able to use its normal lender bank's investment banking arm to help finance a big new project."Having an existing credit relationship can make it easier to get credit approval for any associated derivatives," it said.

"In addition, using a global bank can enable relationships and precedents established in one country to be used to open up and establish new activity in new countries."

It also cited multinationals that buy raw materials in several geographic locations, from hundreds of suppliers, manufacture products in many different countries, and sell into multiple markets.

On the dangers of Britain going it alone on banking reform, Cridland echoed the banks in saying the "international nature" of the banking system had to be recognised.

"The UK could put itself at a significant competitive disadvantage, with negative consequences for the broader economy, by acting in isolation."