Andrew Bailey, a deputy governor of the Bank of England, told parliament it was "frankly unfortunate" that banks such as Barclays had complained in the press about the new "ring-fencing" rules.

Major UK lenders will have to wrap their retail arms with extra capital from 2019 and insulate them from more risky investment banking activities, and banks have complained about the extra cost and upheaval of this change.

"If you seek to do it via the press, that does not go down well," Bailey told parliament's Treasury Select Committee.

Last month Barclays chairman John McFarlane told reporters: "We've got to be very careful to make sure we don't create prudential issues in the remaining bank in creating a ring-fenced bank."

Bailey said he had not received any applications from banks asking for waivers from some of the ring-fencing rules, and that any granted would be published.

All indications from government and ministers were that they are "firmly committed" to applying the new rules, he added.

One Conservative lawmaker, Jacob Rees-Mogg, asked Bailey to clarify that the BoE did not oppose all attempts by banks to make public their concerns about the impact of regulation.

FREE BANKING?

Bailey did not expect ring-fencing to have much impact on borrowing, but it would raise the issue of future viability of investment banking arms, which was coming in any case.

In some cases European investment banks lacked economies of scale and did not have a large domestic market like their U.S. rivals, Bailey said.

Ring-fencing would also force banks to ask if they could continue offering free current accounts, given that they are paid for by cross-subsidies within the bank, Bailey said.

"Will it put pressure on that? It will to a degree... It will be something to force that issue on the table."

Bailey declined to be drawn on how much a new tax surcharge on bank profits next year would hamper competition.

Some lawmakers have said that encouraging more credit unions, a local form of savings and loans mutuals, would also increase competition in a sector dominated by a few big banks.

"If we want this in this country then we have to do something more about it," Bailey said.

On Dec. 1 the PRA will publish the results of this year's bank stress tests whose scale some lawmakers said was burdensome. Bailey said banks will marshall data for the annual tests more easily as the years go by.

(Additional reporting by Lisa Barrington; Editing by Mark Heinrich)

By Huw Jones and David Milliken