More British banks threaten a Scottish exodus if the “Yes” vote for independence wins in the September 18th referendum. The Royal Bank of Scotland (RBS), Lloyds Banking Group and Clydesdale Bank say they would move south.
In fact, RBS and Lloyds are rumored to be looking into moving to London regardless, in case there are future referenda. The two banks are partly owned by the British taxpayer – they were bailed out in 2008 during the global financial crisis.
A number of surveys during the weekend have shown for the first time that the “Yes” campaign had a slight lead. However, today the “No” camp appears to have regained the lead.
The leaders of Britain’s three main political parties – David Cameron (Conservative), Ed Miliband (Labour) and Nick Clegg (Liberal Democrats) – for once abandoned inter-party bickering and joined forces in support of maintaining the UK together.
All three leaders went to Scotland and told voters that if they rejected independence they would gain more autonomy.
Scotland’s leading broadsheet (non-tabloid newspaper) – The Scotsman – in a blow to the independence campaign, came out today in favor of Scotland remaining as part of the United Kingdom.
Financial institutions planning to move out
A growing number of financial institutions have said they will move south:
Lloyds Banking Group, which is 25% owned by the state (in 2008 the government bailed it out with ₤17 billion), says it is looking at setting up legal entities in England.
Lloyds says it has received an increased level of inquiries from customers, stakeholders and colleagues regarding its plans after the Scottish referendum.
“While the scale of potential change is currently unclear, we have contingency plans in place which include the establishment of new legal entities in England. This is a legal procedure and there would be no immediate changes or issues which could affect our business or our customers,” the bank wrote.
RBS (80% owned by the UK government) says it will re-domicile its holding company in London.
“There are a number of material uncertainties arising from the Scottish referendum vote which could have a bearing on the Bank’s credit ratings, and the fiscal, monetary, legal and regulatory landscape to which it is subject. For this reason, RBS has undertaken contingency planning for the possible business implications of a ‘Yes’ vote. RBS believes that this is the responsible and prudent thing to do and something that its customers, staff and shareholders would expect it to do.”
“As part of such contingency planning, RBS believes that it would be necessary to re-domicile the Bank’s holding company and its primary rated operating entity (The Royal Bank of Scotland plc) to England. In the event of a ‘Yes’ vote, the decision to re-domicile should have no impact on everyday banking services used by our customers throughout the British Isles. However, RBS believes that it would be the most effective way to provide clarity to all our stakeholders and mitigate the risks previously identified in our Annual Report.”
TSB Banking Group, of which Lloyds is a majority shareholder, says it will need to reapply for its banking license in London. It only has a Scottish banking license.
Bank of England Governor, Mark Carney, has said an independent Scotland would need massive reserves if it wanted to carry on using the pound sterling as its national currency, if no arrangement were agreed with the rest of the UK.
Alex Salmond, head of the Scottish National Party, believes it is possible to come to a deal with the UK for sharing the pound. Mr. Carney’s latest comment is a blow to Mr. Salmond’s plans, because they could threaten his spending pledges.
Mr. Carney says currency union not possible
At a Trade Union Congress press conference, Mark Carney was asked whether an independent Scotland could retain the pound sterling, and if not, what the consequence would be for the Scottish economy.
Mr. Carney responded that there are three components to a successful currency union.
- Firstly, you must have free movement of capital labor, goods and services.
- Secondly, you need a banking union, i.e. the two countries must have the same banking standards and regulations. You also need the institutions to stand behind those banks … a lender of last resort, which is in virtually all cases a central bank.
- Thirdly, you need some type of fiscal arrangement. Tax, revenues and spending need to be crossing along those borders, to help equalize to some extent the inevitable fluctuations in the different economies. “We only have to look across the channel (the Eurozone) to see what happens when we don’t have all of those components in place,” he explained.
Those three points explain just the economics of it, Carney stressed.
“We take note of the positions of all the major Westminster parties, and rule out a currency union between an independent Scotland and the rest of the UK.”
In that context, Mr. Carney added, a currency union is incompatible with sovereignty. You can watch Mr. Carney’s response in the video below.