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Ed Miliband: "For an industry that's supposed to be a service, [banking] has been a pretty poor service"
The UK's five largest banks are too powerful and should be forced to give up "significant" numbers of branches, Labour leader Ed Miliband has said.
He argued financial services have been "an incredibly poor servant of the real economy" for decades and should be "serving" the needs of small business.
A Labour government would "turn the tide" by creating two "challenger" banks to boost High Street competition.
But the Conservatives said Labour's policies were "all over the place".
The "big five" banks - HSBC, Barclays, RBS, Santander and Lloyds Banking Group - account for the majority of bank customers and lending.
In his speech at the University of London, Mr Miliband likened the "broken" banking system to the energy market, claiming "too much power is concentrated in too few hands" and this has had a detrimental effect on enterprise and jobs.
A Labour government, he said, would instruct the Competition and Markets Authority to report within six months of the May 2015 general election what the limit on a bank's market share should be and the timetable for any sell-off of branches, which should be completed by 2020.
'Reckoning'He said: "Of course, financial services are an important industry in itself. But for an industry that is supposed to be a 'service', it has been an incredibly poor servant of the real economy, not just since 2010 - or 2008 - but for decades in this country.
"We need a reckoning with our banks, not for retribution, but for reform to tackle the cost of living crisis in our country.
"Start Quote
End Quote Ed MilibandI am not talking about whether we should have new banks but about how we make it happen."
Mr Miliband added: "If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy.
"In America, by law, they have a test so that no bank can get become so big and powerful that it dominates the market.
"I want to talk about the same principle here...and establish for the first time a threshold for the market share any one bank can have of personal accounts and small-business lending."
Labour would also introduce a new National Credit Register for small and medium-sized businesses, to increase competition and improve lending to small business by allowing all banks access to comprehensive data on their credit histories.
Bank of England Governor Mark Carney said earlier this week that he supported the view that a cap on banks' market share "would not result in substantial improvement to competition".
'Labour's recession'He told the Commons Treasury Committee: "Just breaking up an institution doesn't necessarily create or enable a more intensive competitive structure."
But Mr Miliband insisted: "I am not talking about whether we should have new banks but about how we make it happen...
Extracts of the speech to be given by the Labour leader say: "We have to get to the root of the decades-long problem in British banking - too much power concentrated in too few hands.
"Britain has one of the most concentrated banking systems in the world, with just four banks controlling 85% of small business lending."
Ed Miliband will pledge that big banks cannot get any bigger.
Bankers have said to me this would lead to what they call a perverse outcome, that as they approached the maximum size they would dump customers they deemed low quality or loss-making.
It is unclear whether these customers would be able to bank elsewhere.
"It is not about creating new banks that control some tiny proportion of the market, but new banks that have a substantial proportion and can properly challenge existing banks.
"And we are not asking whether existing banks might have to divest themselves of a significant number of branches. We are asking how we make it happen."
Mr Miliband acknowledged the last Labour government had made mistakes in bank regulation but said David Cameron was happy with a "steady as you go" approach to bank reform while more radical steps were needed.
Asked what he thought the maximum size of a bank should be, he said he would "not dream up a figure out of the air" and the regulators should decide - but he made it clear that new entrants should be "sizeable".
Speaking earlier shadow business secretary Chuka Umunna acknowledged the plans may cause share prices of banks - including state-backed RBS and Lloyds - to fall - but they would be beneficial for the economy in the long run.
Asked about Mr Carney's remarks, he said the bank governor should not be dragged into political matters and suggested he had only expressed his view after being asked a "leading question" by a Conservative MP.
'Labour mess'"Start Quote
End Quote Anthony Browne British Bankers AssociationForcing people to change bank by selling their local branch is not what customers want,"
For the Conservatives, Treasury minister Sajid Javid said Labour had caused many of problems with the banking system and Ed Miliband was "complaining that his own mess isn't being cleaned up fast enough".
Lib Dem Business Secretary Vince Cable said he agreed more competition was needed but many of the things Labour wanted "have actually happened"
The British Bankers Association said competition was as much about the range of products on offer as the number of banks on the High Street.
"Forcing people to change bank by selling their local branch is not what customers want," said its chief executive Anthony Browne.
"People want to choose who they bank with - these proposals would see customers forced by politicians use a different bank against their will."
Efforts by the Lloyds Banking Group to dispose of more than 630 branches last year foundered after Co-op pulled out of a deal due to financial problems.
But the firm has re-launched the TSB retail bank, with about 600 branches, while RBS has set out plans to revive Williams and Glyn's - which ceased trading in 1985 -to take over RBS branches in England and Wales and NatWest outlets in Scotland.
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