Top banks plan move in case of Scots' independence
Sep. 11, 2014
LONDON (AP) — In a blow to the Scottish independence campaign, top financial groups including the Royal Bank of Scotland and Lloyds Banking Group say they will move their headquarters to England if Scots vote to break away from the United Kingdom.
RBS, which has been based in Scotland since 1727, said Thursday it has drawn up the contingency plans because of uncertainties that could hurt its business and customers if Scots approve independence in the Sept. 18 vote. Lloyds Banking Group, which owns Halifax and Bank of Scotland, also said it had plans to set up new "legal entities" in England if the Yes campaign succeeds.
Although the banks say the moves would be legal procedures that would have a minimum impact on their operations and jobs in Scotland, their warnings intensified concerns about an independent Scotland's ability to retain businesses — particularly during the months of financial uncertainty that would follow a vote to break the 307-year union with England.
Scotland would, among other things, have to figure out what currency to use and how much U.K. public debt to take on. These issues would have to be ironed out in months of negotiations before Scotland achieves full independence.
"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," RBS said in a statement.
Alex Salmond, Scotland's leading politician, dismissed the warnings as "scare-mongering" and accused the British government of exploiting the news for political gain. Salmond alleged the Treasury had breached financial rules because it briefed journalists about RBS's plans ahead of the market announcement.
The latest polls suggest that an independent Scotland — until recently dismissed as a highly unlikely outcome — could become a possibility as the independence campaign gains momentum. Almost 4.3 million people have registered to vote, the largest electorate ever for a ballot in Scotland.
That has sent jitters through the markets, prompting investors to sell off the British pound. The pro-independence campaign argues that Scotland could sustain itself economically, but their opponents — including many businesses in Scotland — have focused on the uncertainties.
On Thursday, leading retailers including supermarket giant Asda and department store John Lewis also chimed in, raising alarms about possible higher prices for Scottish shoppers.
"It does cost more money to trade in parts of Scotland and therefore those hard costs, in the event of a Yes vote, are more likely to be passed on," said John Lewis Partnership chairman Charlie Mayfield.
RBS, a key employer in Scotland and a symbol of its financial sector, said it would be necessary to re-domicile its holding company and its main operating entity, the Royal Bank of Scotland PLC, to England.
Despite its name, RBS is currently majority-owned by the taxpayers of the entire U.K., since it needed a government bailout in 2008 to make up for bad investment decisions. It has operations throughout the U.K. and foreign countries, but its relocation would be a symbolic blow to an independent Scotland.
The U.K. government also owns a significant share of Lloyds.
The smaller Clydesdale Bank also announced similar plans to relocate south of the border to mitigate risks.
The financial group Standard Life earlier said it was ready to move parts of its business to England in case of independence. Precautionary measures include transferring pensions, investments and other long-term savings to new companies to ensure they remain part of Britain's currency and tax regime.
Experts say the banks announced their contingency plans to avoid further risks to themselves as well as the market.
"Given the huge amount of volatility next week in case of a Yes vote, the Bank of England would have put high pressure on the banks to move south for the purposes of preserving financial stability and confidence," said Ronald MacDonald, a political economy professor at the University of Glasgow.
Ian Gordon, an analyst at Investec, said the banks' warnings conformed to market expectations and do not signal any real changes.
"I wouldn't discount over time there being some broader implications, but it's fairly procedural," he said.