It is a solution that has the benefit, from Osborne's perspective, of being politically neat. The Tories have always promoted something that borrows from Glass-Steagall but doesn't go quite so far. And while the Lib Dems might have preferred the Chancellor to go all the way, and announce a full separation between investment and retail banking, they have already signalled their satisfaction with this approach. Peace, for once, reigns.
Or does it? Quite apart from how the banks will react — and many of them are sweating that any sort of split will make it more difficult for them to raise capital — there is still the potential for political turbulence. Much depends on the details of how Osborne intends to implement these subsidiaries, of which we know little. One option is to use them as a fall-back, operating only during times of economic stress. Another is to have them operating fulltime, regardless of the state of the economy. The latter, one assumes, would be more amendable to the Lib Dems. The former to the banks and, possibly, Tory backbenchers. Even within splits, it seems, there are further splits to consider.