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Independent Scotland Would Need IMF Bailout If Banks Went Under

Independent Scotland Would Be 'Devastated' If Banks Went Under
The Huffington Post/PA
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GLASGOW, SCOTLAND - JANUARY 30: In this photo illustration, Scottish bank notes are placed on a table on January 30, 2014 in Glasgow, Scotland. The Governor of the Bank of England Mark Carney, said yesterday during a speech in Edinburgh, that an independent Scotland would need to give up some power to make a currency union with the rest of the UK work. (Photo Illustration by Jeff J Mitchell/Getty Images)
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Scotland would have been "devastated" and forced to turn to the IMF for help if it had been independent during the financial crisis, it has been claimed following new analysis of the country's banks.

The Banker magazine examined the potential split of banking assets under Scottish independence as it produced its annual report ranking the top 1,000 world banks.

It found a Yes vote in the September referendum could see an independent Scotland's economy in danger of being destabilised by its own banking sector.

Pro-Union campaigners said it was a "significant intervention" but the Scottish Government said the figures were outdated and "do not reflect the reality of Scotland's financial sector".

According to the trade publication's figures, currently UK banks have a total of 9.9 trillion US dollars in assets, roughly four times UK GDP.

But if Scotland left and became responsible for Scottish-headquartered banks such as RBS, HBOS and Clydesdale, it would have banking assets of 12 times Scottish GDP, the report found, potentially creating problems for the Government if there was ever a run on the banks.

This would be larger than the 10:1 ratio that proved "ruinous" for Iceland, and "presents a significant risk for the country's economic stability", it was claimed.

The calculation was based on a Scottish GDP figure of 219 billion US dollars. The total assets for Clydesdale, RBS and HBOS - taken from all HBOS subsidiaries and Scottish activity within Lloyds still registered to Edinburgh - were assessed as being 2.626 trillion US dollars, or 12 times that amount.

Those behind the study acknowledge it is based on the assumption that banking assets registered in Scotland would not be placed in London in the event of a Yes vote.

Editor of The Banker, Brian Caplen said: "Had it been independent during the financial crisis, there is little doubt that an independent Scotland would have been devastated and forced to turn to the IMF for help.

"The temptation in future under independence would be to give Edinburgh light touch regulation to make it more competitive as a financial centre. This might have serious consequences."

Scotland's Independence Bid
Scottish Nationalism Has A Long And Proud History(01 of10)
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Scottish national identity dates back to at least the Middle Ages, hundreds of years prior to the Scottish wars of independence that are so familiar to "Braveheart" movie fans everywhere. In fact, hundreds of Scottish clans still gather throughout the year to commemorate their ancestry and maintain their cultural identity. (credit:Andy Buchanan/AFP/Getty Images)
The U.K. Doesn't Have A Constitution(02 of10)
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The BBC notes that the U.K. is one of only three countries that do not have a written constitution (the other two being Israel and New Zealand).

The Scottish government wants to assert sovereignty with a constitutional document and has already proposed a draft for public consultation. First Deputy Minister Nicola Sturgeon set out the case in a recent speech: "A written constitution is an important part of a nation's identity - it defines who we are and sets out the values that we hold dear." (credit:AP)
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Scottish independence advocates say oil reserves off the country's northern coast could help bankroll an independent Scotland. Alex Salmond, the head of Scotland's government and a champion of Scottish independence, told the BBC that using ten percent of tax revenues from the North Sea oil and gas industry for a Norwegian-style oil fund could create £30 billion ($50 billion) in sovereign wealth over a generation.

British Prime Minister David Cameron, however, argues that the North Sea's lucrative energy industry depends for its success on the backing of the U.K. (credit:Getty Images)
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Both U.K. Prime Minister David Cameron and Scottish First Minister Alex Salmond are trying to win the hearts and minds of the Scots, but not always to great success.

The BBC reports that Scotland's tabloids have had a field day comparing their differing campaign styles. The Daily Record wrote about Cameron: "If you believe Scotland will be taken in by a token charm offensive from your Con-Dem Cabinet of elitists who hammer the poor while lining the pockets of their millionaire pals . . . scuttle off homewards to think again." The Scottish Sun also criticized the Prime Minister's efforts, terming him "David Camouflage." (credit:Getty Images)
The U.S. Has Stepped Into The Debate (Well, Kind Of)(05 of10)
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President Obama ruffled a few feathers when he announced that the U.S. supports a "strong, robust, united and effective" United Kingdom. Obama added, however, is that it is "up to the people of Scotland" to decide on potential independence from the United Kingdom.

Scotland's First Minister, Alex Salmond, brushed off the comment, before responding with a tweet re-appropriating the American president's election campaign slogan, writing: "Our message to the people of Scotland is: ‘Yes We Can.'" (credit:AP)
Celebrities And Religious Leaders Have Weighed In(06 of10)
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There was outrage when a Scottish charity tweeted that Harry Potter author JK Rowling was "a bitch" for donating £1 million ($1.7 million) to a campaign in favor of keeping Scotland part of the U.K. (The charity later said its Twitter account had been hacked.)

In fact, Rowling is only one out of a long list of celebrities that have commented on the referendum, including actor Sean Connery, singer and reality television star Susan Boyle and actress Emma Thompson. Pope Francis is another public figure that added his two cents. He suggested a "case-by-case" basis for countries that wish to break away from larger states and suggested Scotland's case was not clear cut. (credit:AP)
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Roughly 5 million people living in Scotland will vote in September's "yes"/"no" referendum. While 1.15 million Scots who are living outside of the country won't be allowed to vote -- Sean Connery is one of them -- certain foreign nationals living in the country, as well as 16- and 17-year-old are allowed to register. As Bloomberg notes, the inclusion of resident non-Scots is unusual, as referenda are usually based on nationality, not where you live. (credit:Getty Images)
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One of the central issues surrounding the Scottish bid for independence is the question of whether an independent Scotland would retain the Sterling Pound. Scottish First Minister Alex Salmond has advocated keeping the British currency to assure smooth business transactions.

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The official site of the "Yes Scotland" independence movement devotes a page to quell the fears of any monarchy-loving folks: "The Scottish Government’s proposal is that the Queen remains Head of State in Scotland." (Quick history lesson: they have shared a monarch since 1603; they merged into a single state of Great Britain a century later with the 1707 Act of the Union.)

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The "Union Jack" flag was born out of the union of the Scottish and English monarchies in the 17th centuries, and was updated when Ireland united with Great Britain in 1801. But with the possibility of Scotland's independence from the U.K., the future of the flag could be in jeopardy since it consists of overlays of the English, Scottish, and Irish designs.

Brits who are not paying attention to the independence debate might sit up and take notice when they see some of the more zany alternative designs suggested by flag experts.
CLARIFICATION: The language of this post was changed to reflect that the design of the "Union Jack" changed after Ireland united with Great-Britain in 1801. (credit:Getty Images)

A spokesman for pro-UK campaign group Better Together said: "This is another significant intervention and one that Alex Salmond can't just ignore. We deserve more than bluff and bluster from the First Minister.

"By pooling our resources and sharing our resources across the United Kingdom it meant we were protected from big economic shocks like the banking crisis.

"However, this report confirms that separation would present a significant risk to Scotland's economic stability. The Nationalists are asking us to take a huge gamble that we don't have to take and that is why we should say No Thanks to separation."

However a Scottish Government spokesman said: "These figures are outdated and do not reflect the reality of Scotland's financial sector. Financial services accounts for a lower share of our overall economy at around 7% than they do for the UK as a whole. The figures quoted in this report artificially inflate Scotland's financial assets by assigning investment banking activity which takes place almost exclusively in London to Scotland, and by failing to take account of both the recent reforms to the financial services sector and the deleveraging of institutions following the UK financial crisis.

"Independence would create the opportunity for Scotland to pursue a more productive, resilient and fairer economic model that delivered long-term sustainability and economic opportunity for all."

Tony Banks, chair of pro-independence Business for Scotland group, added: "Banks don't get government support according to where they are headquartered, the support is given where the bank's operations are. That's why RBS got more support from the US Government than from the UK Government and why Fortis was bailed out by Belgium, the Netherlands and Luxembourg working together.

"Financial services accounts for a lower share of Scotland's economy - 8% - than the UK as a whole. It looks like The Banker has wrongly assigned London investment banking activity to Scotland. It's also worth bearing in mind the reform of the financial services sector and the deleveraging after the UK financial crisis."

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