Britain's top banks have begun preparing for a major shake-up ahead of a government decision, to reassure investors that they can handle expected changes to the way they operate, sources said.

The 'Big Four' banks - Barclays, HSBC, and part-nationalised Lloyds and Royal Bank of Scotland (RBS) - have stepped up lobbying against excessive new regulation in the run-up to the Independent Commission on Banking's (ICB) final report on September 12.

But analysts say banks have accepted that moves to make them ring-fence retail operations from riskier investment banking activities and hold more capital appear inevitable even if the government does not implement the ICB's recommendations for several years.

'What will happen is that banks will work out what timeline they need to hit to appease investor and market confidence, and so they may implement a plan ahead of an official schedule,' said Ajay Rawal, senior director of Alvarez & Marsal, which specialises in bank restructurings.

The banks have begun preparing for how to deal with ring-fencing their main retail operations rather than hope for the government to delay the reforms, sources said.

'Work is underway, based on what we know and expect. The banks have started preparation for what is required,' a source at one of the four banks said.

The source said companies had been analysing scenarios after the ICB suggested ring-fencing in April.

'There is not much you can do until we know for sure what is contained in the ring-fence, but clearly people have thought of how it may work and what it may look like,' said the source.

Brokerage Seymour Pierce estimates that Barclays and RBS would be hit the hardest by a ring-fencing model, partly because of their large investment banking operations and that the industry cannot escape from an eventual restructuring. 'The banking system has been on life support since 2007. There must come a time for the patient to undergo surgery and physiotherapy,' the source said.

The ICB is expected to back proposals made in an interim report. It has said the moves will help protect taxpayers from future financial crises.