CLYDESDALE Bank has reaffirmed its neutral stance over Scottish independence, after a report warned of bank rating “uncertainties” if Scottish voters decide to end their country’s union with England later this year.
Ratings agency Standard & Poor’s said there were “important considerations and uncertainties” that factored into the creditworthiness of banks should Scotland vote to become independent in September.
Britain’s three main political parties have been campaigning to keep the union intact, arguing that both countries are better off together, while Scottish nationalists believe a split would give them the economic freedom to prosper.
In a report, S&P said it counted the existence of a Scottish central bank, the Scottish government’s attitude towards helping struggling banks, changes to financial regulation and independent Scotland’s currency among the crucial factors that could affect its ratings on the country’s banks.
It added that its ratings on British banks currently assumed that the UK government would provide extraordinary support to systemically important banks under stress.
“The willingness and ability of the Scottish government to support its banking sector appears challenging,” S&P said, highlighting that the Scottish banking system’s assets are currently a high 1,254 per cent of Scotland’s GDP.
This compares with 880 per cent for Iceland in 2007, just before its banking system collapsed, the ratings agency said. It currently classifies Iceland as “support uncertain”, which means it is factoring no extraordinary government help into domestic bank ratings.
“We note a possible parallel here with Iceland, where in 2008 the national deposit insurance scheme could not honour claims when the country’s outsized banking system failed.”
S&P said that, if Scotland chose to give up the British pound with the Bank of England’s safety net, it would need credible deposit insurance arrangements on standby to bail out too-big-to-fail banks and instill depositor confidence.
The agency added that, if Scotland chose to leave the pound, creating a separate banking market would mean higher costs for all banks operating in the country.
The report added: “If Scotland votes for independence in September, we expect that the Scottish and remaining UK Governments (and the European Commission) would enter a period of negotiation to agree a multitude of crucial details, ahead of independence taking effect. We anticipate that banks, Scottish or otherwise, could need considerable time to adjust.”
New York-based money manager BlackRock said last month that Scotland would be better off launching its own currency rather than keeping the British pound or joining the euro.
The report follows a number of warnings from other financial services companies, including RBS, Standard Life and Barclays. The bosses of oil companies BP and Royal Dutch Shell have also voiced arguments against a ‘yes’ vote for independence.
Clydesdale Bank, and its sister brand Yorkshire Bank, are owned by National Australia Bank. A spokesman for Yorkshire and Clydesdale said: “We consider that Scottish independence is a matter for the people of Scotland to decide.
“We have customers, employees and investors on both sides of the debate and believe maintaining a neutral position is appropriate.
“As with all prudent businesses, we consider the environment in which we operate as part of our normal planning process and continue to closely monitor the referendum debate.”
In October last year, Clydesdale and Yorkshire Banks employed around 7,013 full-time staff. A Yorkshire and Clydesdale Banks spokesman added: “In Scotland, we employ 4,000 FTE (full time employees). There are more than 1,000 employees in Yorkshire.
“Earlier this year, we opened our new business and private banking centre within the Merrion Way head office (in Leeds) as part of a move to consolidate key operations in this important building.”