After the shocks of the financial crisis and the pain of the recession, there is an understandable popular clamour for tougher banking regulation. Polls suggest the more radical the reforms, the better. Politicians now face impossible demands to design a regime that can shelter taxpayers from the proverbial 100-year storm, which grinds all risk out of the system in pursuit of the nirvana of eternal financial stability, but with no collateral cost to growth.

In this fevered context, the coalition government deserves credit for establishing the Independent Commission on Banking in June 2010 and for now agreeing to implement its recommendations by 2019. This is a well-thought through series of steps towards a new banking system that supports lending to businesses and families, but does not cost the taxpayer billions of pounds when it goes wrong. There is inevitably a risk, however, in leading the world in learning the lessons from the failures of the last decade. In particular, there is a real danger of regulatory overkill if it turns out that the ICB has exaggerated the benefits of intervention and underestimated the costs.

Ringfencing the banks and increasing the level of Core Tier 1 capital significantly beyond what is proposed by international standards may turn out to have only marginal benefit to financial stability, whilst imposing significant increases on the cost of credit. The Treasury must reflect on this trade-off. It may transpire that Vickers is naive in downplaying potential increases in bank funding costs and in believing that these increases would fall as much on financial institutions' shareholders and employees as much as on borrowers. He argues that if debt costs 5 per cent (net of tax) and equity 15 per cent, increasing the proportion of risk-weighted assets funded by equity from 7 per cent (the Basel III minimum) to 20 per cent - the top of the range of estimates presented in the Interim Report and twice the level Vickers actually recommends - would increase the average cost of funding by just 65 basis points (assuming an average risk weight of 50 per cent).

Substantial increases in equity funding would make banks theoretically less risky, and so potentially mitigate increases in funding costs. But the lack of competition in UK banking, exacerbated by the merger of Lloyds and HBOS, means this will probably fall mostly on borrowers. Moreover, the ICB seems a little blasé with respect to the issue of forced deleveraging. Much higher equity requirements imply balance sheets that are much less highly leveraged than they are today. If banks were to achieve higher equity ratios by deleveraging, rather than by raising costly new equity, as is likely, there would be a risk of an unwelcome contraction in the supply of lending.

It is also worth reminding ourselves that ringfencing, although expensive to implement and likely to disadvantage British banks, is in itself no panacea. The creation of more "narrow" banks through ringfencing would not head off any future financial crisis confined to the retail banking sector. In the recent crisis, a number of such banks - including Northern Rock, Bradford & Bingley and HBOS - not only failed, but turned out to be systemic in death. Nor would a ringfence arrangement have prevented the crash of Lehman Brothers, which would have been entirely outside of the ringfence. Indeed, that is why the focus of the international regulatory response has been on enhanced liquidity and capital.

In calling for structural remedies and even larger capital buffers, Vickers' belt-and-braces approach may also have underestimated the cumulative impact of the reforms already under way. Since the crisis, banks have increased their capital, overhauled risk management and reinforced their liquidity buffers. Even more is already in the pipeline, and a fully implemented Basel III will lead to banks' minimum capital requirements being increased many times from pre-crisis levels. Provisions for bail-in debt and enhanced recovery and resolution plans should enable banks to fail in a more orderly manner that minimises taxpayer exposure. MPs will want to know that the Treasury has conducted a thorough proper cost-benefit analysis of the Vickers recommendations by the time they are asked to pass binding legislation to implement them.

Jo Johnson is the Conservative MP for Orpington, a borough constituency in the London borough of Bromley.