Economist John Vickers, who heads a body reviewing whether to split banks' investment and retail entities, said taxpayers should not have to provide "a generous safety net" to stop banks from collapsing.
"For the most part, retail customers have no effective alternative to their banks for vital financial services, and hence there is an overriding economic, social and political imperative to avert any disruption to the continuous provision of those services," Vickers said.
"The task is to find better ways of ensuring this, if possible, while allowing unsuccessful individual institutions to fail safely," he said in a speech at the London Business School.
"Ultimately, financial risks have to be borne, and in a market system they should not be borne by the taxpayer providing a generous safety net."
Vickers is a former chief economist of the Bank of England who served on the Bank’s Monetary Policy Committee from 1998 to 2000. He was then head of the Office of Fair Trading until 2005.
"If the probability and/or impact of bank failure particularly of retail service provision can be reduced by forms of separation between banking activities, then so too might capital requirements," he said.
"If so, the case for structural reform might be greater the higher is the cost of bank capital."
Just six banks control almost 90 percent of all deposits in Britain, a far higher figure than in Germany or the United States.
The fear that British banks have become "too big to fail" was fuelled by the financial crisis when the government had to bail out Royal Bank of Scotland, Northern Rock and the Lloyds banking group.
The commission is due to publish interim proposals in April, with a final report to follow in September.