Liberal Democrat Treasury spokesman Vince Cable has called on Chancellor Alistair Darling to adopt US President Barack Obama's proposed banking reforms.
Mr Darling rejected the calls to separate retail and investment banking, likening them to the strategies of a "general fighting the last war".
At his departmental question session on 2 February 2010, he insisted that ensuring banks engaged in any risky trading had adequate capital was a more appropriate way of maintaining financial stability.
Mr Cable claimed that the government and the Tories had been persuaded against splitting up the banks by the City "for its own self-interested reasons".
For the Conservatives, George Osborne said Mr Darling was "proving quite a defender of the old model of finance".
He said president Obama was not talking of a full-scale break-up of the banks but wanted to "separate retail deposit-taking from large-scale proprietary trading, large internal hedge funds and large internal private equity funds and I agree with him".
But Mr Darling told MPs that "most British banks don't actually engage in that much proprietary trading".
"It certainly wasn't the root cause of what the problems are," he added.