AN INDEPENDENT Scotland would find it difficult to guarantee savers deposits in banks, the Treasury has claimed in a new report out today, leaving bank and building society customers vulnerable.
Currently depositors are guaranteed up to £85,000, with the government bailing out savers in a failed bank and the rest of the industry paying that debt back over the following years – as in the case of failed Icelandic banks and Bradford and Bingley.
But the government today argues that such a guarantee would be difficult to put in place in Scotland.
As the sector is dominated by RBS and the Bank of Scotland, any failure would place a huge burden on the remaining bank, which the Treasury argues would be unable to cope.
First, if either of Scotland's two banks fell over, the overwhelming majority of depositors would be in the rest of the UK, so that it would fall to the UK Treasury (and ultimately the English banks) to meet the bulk of the guarantee. Second, if the two Scottish banks are taken out of the equation, the situation in the rest of the UK would be dominated by two English banks (Barclays and HSBC). If either of them fell over, the English would be in exactly the same position as the Treasury suggests the Scots would be.