Former RBS chief executive George Mathewson has hit out at warnings over the scale of Scotland’s financial services sector and says the need for some banks to relocate if the country becomes independent are “nonsense”.
Mathewson hit out against the ‘No’ campaign against Scottish independence and argued the UK government’s statement that it cannot share the pound with an independent Scotland is “even less convincing”.
Last week RBS issued a warning as part of its interim results statement that Scottish independence could “significantly impact the group’s costs and would have a material adverse effect on the group’s business financial condition, results of operations and prospects.”
RBS chairman Sir Philip Hampton also hinted last year that the bank would consider moving its headquarters to London if “extra difficulties” were created following a vote for independence.
Separate concerns have been raised amongst others including the UK Treasury that the scale of Scotland’s banking sector, which dwarfs the size of Scotland’s economy, would threaten the financial stability of an independent Scotland
However writing for the FT, Mathewson suggests that being headquartered in Scotland would not impact either the bank itself or the broader Scottish economy because the majority of economic assets at the large Scottish banks are actually located outside of the country.
He says: “It is nonsense to argue that Scotland’s banking sector would make independence impossible to achieve. Banks such as RBS and Lloyds Banking Group have strong Scottish connections but they can scarcely be described as Scottish banks. In reality they are run from London, and that is where they are regulated. The customers, assets and ownership are global, even if the holding company happens to be registered in Edinburgh.
“The location of a brass plate bearing the name of a bank may determine where the institution formally resides. But it does not tell you which government is primarily responsible for overseeing the bank or for limiting the damage if things go wrong. That depends principally on where the bank’s economic assets are located.”
For Scotland’s two largest financial institutions, RBS and Lloyds, this responsibility would lie with the UK government, according to Mathewson. He adds: “In the case of RBS and Lloyds, which have substantial operations throughout the UK, the answer is clear. The UK government already owns significant chunks of both institutions; 80 per cent, in the case of RBS.
“That is the legacy of a rescue package principally designed to protect the global financial system from the consequences of losses in London-based investment banks.”
Mathewson also argues that when combined with separate claims made by the UK government that it could not share the pound with an independent Scotland, these warnings over the possible relocation of Scottish banks reveal that Westminster is actually trying to “have it both ways”.
He adds: “Even less convincing is the Westminster line on a currency union. The No campaign, abetted by the British government, claims that an independent Scotland could not continue in a sterling currency union because Scotland would have independent financial institutions lying beyond the reach of regulators in London.
“But at the same time they argue that these financial institutions would relocate to London in the event of independence, leaving Scotland poorer. They cannot have it both ways. This is “bluff and bluster”, as Alex Salmond, first minister of Scotland, has said.”