Lord Mandelson claimed the plans to stop banks from engaging in proprietary trading and owning hedge funds were too ambitious and difficult to regulate.
"Trying to apply sweeping rules about the structure, content and range of activities of banking entities is too difficult to do," he stated.
He added that regulation should be focused on "principle and practice" rather than attempting to reduce the size of financial institutions.
Lord Mandelson also said that President Obama should instead be concentrating on working with the other G20 nations to bring about effective global reform of the banking sector.
Last month, Gerald Corrigan, a managing director at Goldman Sachs, told a senate committee that the financial institution would see around ten per cent of its revenue stream impacted if President Obama's plans take effect.
By Gary Cooper