When the UK coalition government declared that an independent commission would advise on the thorny question of whether to break up Britain’s banks, one might expect nothing to be done until the report is completed late in 2011.

However, the constraints of market and regulatory timetables mean that policy decisions need to be taken now. And these decisions can create ‘facts on the ground’ for UK banks long before the report is due.

In its latest financial stability report, the Bank of England worries that UK banks will need to refinance £750 billion of maturing debt by the end of 2012, which will be tough if deposits are not going to take up the slack.

On the asset side, UK banks face a double whammy. With a funding squeeze looming, the banks may have to dispose of assets. And with increased capital and liquidity requirements being introduced by regulators, the banks will have to allocate more of their balance sheet to liquid assets, requiring yet more disposals.

This puts policymakers in a bind. The government is fretting about small business lending which it needs to support its economic recovery forecast. However a large turnover in bank assets could disrupt mortgage lending which would be politically toxic for the coalition.

Yet rather than shield the banks, the government might spot a chance to break them up. How could that work? Encouraging securitisation is an obvious way of maintaining demand for mortgages, but instead of the usual sweeteners such as cheap guarantees or financing for investors, the government could go further. It could use securitisation as the core of an officially sanctioned ‘narrow banking’ system.

These new low-profit banks could invest in safe pieces of UK securitisations, and match them with deposits guaranteed by the government. The broad banks could shrink their assets and liabilities, and develop a new business model of originating mortgages and other loans for the government-sanctioned securitisations, ultimately relinquishing their deposits. This might sound far fetched, but remember that banks are now a political football. When Sir John Vickers writes his report, he may discover that his job is to validate the facts already on the ground.