The separation rather recalls the American Glass-Steaghall Act, which split commercial banks from their riskier investment counterparts. The thinking behind it was that the investment banks could then get up to all kinds of risky behaviour, without then impacting upon ordinary people's money. The Tories have resisted calls for a British equivalent of this, but Osborne's announcement today does suggest that they want to closely police the retail side of the equation, but are less concerned about the investment side of the equation.
Indeed, throw in this passage from the Tories' recent White Paper on banking regulation, and it's clearer that they are working towards some sort of de facto Glass-Steagall Act, which takes riskiness out of retail banking:
So why not just go the whole distance, and introduce a de jure Glass-Steagall arrangement? Well, the argument against that is that it will make banks perform their business in other, less tightly-regulated systems - thereby sapping vast amounts of cash away from our economy. In which case, the Tories' compromise looks attractive on paper. But, as with all regulation, the proof of the pudding will be in the implementation.“
"A Conservative Government will empower the Bank of England to impose much higher capital requirements on high risk activities such as large scale proprietary trading carried out by banks that also take retail deposits. In practice this could prevent banks that take retail deposits from engaging in many of these high risk activities by making them more expensive."