Risk-free accounts guaranteed by the government should be set up as part of a "profound reform of the banking system", a report says.

The cross-party Future of Banking Commission wants improvements in saver protection and restructuring of banks.

The near collapse two years ago of the entire banking system and the ensuing recession shook the wider public's confidence in all banks. So the consumer group Which? invited the Conservative MP David Davis to chair its all party commission into reforming the entire banking system.

David Davis, Chairman, Future of Banking Commission commented: "If we don't do something along these lines, the next time this happens it will break the country. We'll go bankrupt because we depend so much on the banking system, much more than anybody else. Five times the GDP is tied up in bank assets."

Among the dozens of recommendations is a call for profound reform including measures to provide risk-free or safe haven deposit accounts where savers wouldn't lose a penny even if the bank went bust. The commission also wants living wills, where banks in trouble have a plan for their own demise. But most controversially, it wants to break up the banks or to separate the normal retail banking of the high street from the larger, risk-taking investment banking. But is smaller always better?

Eric Leeders, from the British Bankers' Association said: "There are a lot of smaller banks in America that are on a watch list, potentially at risk. We've seen a lot of smaller building societies in the UK find it quite difficult to trade just now and equally across Europe, in Spain again another example."

The report will be presented to George Osborne this week and it is understood the new Chancellor will also be pressing ahead with his plan to strip the City watchdog the FSA of its responsibility for preventing excessive risk-taking by banks. That role will soon return to the Bank of England.