Goldman Sachs and other banks should surrender their bank status if they want to avoid a proposed US ban on proprietary trading, Paul Volcker, head of president Barack Obama’s Economic Recovery Advisory Board, said according to the Financial Times.

Mr Obama has proposed curbs on the size of banks and the idea of splitting the proprietary trading activities of banks – blamed by some for fuelling the financial crisis – from the deposit, retail arms of banks. The idea, if it becomes law, would represent something of a return to the Glass-Steagall legislation that prevailed in the US between 1932 and 1999. However, some wealth management industry figures have been concerned by the idea, saying that such action would not have prevented some of the problems in the banking sector.

However, Mr Volcker, a former Federal Reserve chairman, made it clear that such a proposal would require firms such as Goldman Sachs to reconsider their bank status.

“The implication for Goldman Sachs or any other institution is, do you want to be a bank?” Mr Volcker said in a video interview with the publication. “If you don’t want to follow those [banking] rules, you want to go out and do a lot of proprietary stuff, fine, but don’t do it with a banking licence.”

The argument of Mr Volcker is ironic as Goldman Sachs, along with Morgan Stanley, acquired a banking licence in 2008 as part of the process of receiving state aid under the TARP bailout programme. The banks have since repaid the money. Analysts have also pointed out that, if Glass-Steagall were still in force, Bank of America's takeover of Merrill Lynch in January last year may not have been permitted to go ahead.