The 570-page report, published today, said “clear lines of accountability and enforceable sanctions” are needed to ensure senior bankers are held responsible for their businesses.

Produced in response to a number of failings in the industry, the report noted “the striking limitation on the sense of personal responsibility and accountability of the leaders within the industry for the widespread failings and abuses over which they presided”.

The commission, headed by Andrew Tyrie MP, said the appointment of senior bank executives should be approved by the regulator and a new criminal offence of “reckless misconduct” introduced.

It also suggested bonuses be deferred for up to 10 years, with stringent clawbacks put in place in the event of mismanagement.

Turning to part-nationalised RBS, the report said ministers should formally consider alternative options for the part-nationalised bank by September, suggesting one route is to split the lender into a ‘good’ bank and a ‘bad’ bank.

Chancellor George Osborne’s existing plan for dealing with the lender “risks being insufficient”, the commission added.

The report said the government’s management of RBS and Lloyds via holding company UK Financial Investments amounted to nothing more than a “fig leaf” to disguise its interference, and recommended UKFI be folded back into the Treasury.

RBS CEO Stephen Hester announced his departure from the bank last week, a decision widely believed to have been instigated by Osborne as he seeks to return the bank to private ownership before the next election.

Osborne is expected to respond to the report’s broader findings in tonight’s Mansion House speech.