The Vickers' report comes close to formally breaking up the banks The Independent Commission on Banking (ICB), led by Sir John Vickers, called for the reforms to be implemented by the start of 2019 at the latest.
Chancellor George Osborne must now decide whether to act on the report.
He has already said the Vickers' report is a "good" one, because the banking industry had to change.
BBC business editor Robert Peston has called it the most radical reform of British banks in a generation, and possibly ever.
He says it will be hated by the biggest UK banks, Royal Bank of Scotland (RBS) and Barclays.
Another key recommendation is that banks must have have loss-absorbing capacity of between 17-20% of what are called their risk-weighted loans and investments.
The ICB was set up last year to look at how taxpayers could be protected from future banking crises.
The credit crisis resulted in the government nationalising Northern Rock and part-nationalising the Royal Bank of Scotland and Lloyds .
The government now has stakes of 83% and 41% in RBS and Lloyds, respectively.
The ICB said its proposed reforms could result in a pre-tax cost of between £4bn ($6.4 billion) and £7bn for Britain's banks.
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