London - Scotland's bankers will ensure their vaults and cash machines are fully stocked in case a vote for Scottish independence prompts customers to pull their deposits.
A surge in Scottish support for breaking away from the United Kingdom has made an independence vote in 9 days too close to call and the uncertainty has prompted some people to contact their banks for reassurance that their savings will be safe and accessible if a “yes” vote wins.
Bankers have not seen any evidence of withdrawals but are keeping a close eye on online data and updates from branches.
“We're watching like a hawk. We're getting enquiries but we're seeing absolutely no evidence so far of anything like this happening,” a source at one of the banks told Reuters.
Bank of Scotland owner Lloyds and rival Royal Bank of Scotland (RBS), whose registered offices are in Edinburgh, have warned that Scottish independence would present a significant risk to their businesses, impacting their funding, tax and compliance costs.
Industry sources said senior executives from both banks, have held regular meetings with the Scottish and UK governments and with Bank of England officials in recent months and have worked through possible scenarios following the vote.
The sources said banks have urged the Bank of England and the Scottish and UK governments to move swiftly following a “yes” vote to reassure depositors their funds will be safe.
They want lawmakers and the central bank to hammer home the message that there would be no reason for customers to withdraw funds because, for a minimum of 18 months following the vote, Scotland would remain part of the United Kingdom while negotiations over the terms of its exit take place.
“We need to try and reassure people if they have concerns around it,” one of the sources said.
During the transition period, deposits of up to 85,000 pounds (R1.5 million) would still be protected by a compensation scheme run by the British government and the Bank of England would remain the lender of last resort to the banks.
The sources said RBS and Lloyds are not currently planning to extend opening hours or put extra staff in branches but they would be ready to do so if the situation demanded it.
Ratings agency Standard & Poor's has warned an independent Scotland would be unable to credibly support its banks if a new financial crisis struck.
The country's three banks, including National Australia Bank's Clydesdale, have assets worth nearly 12-and-a-half times the size of its economic output.
That backing was starkly illustrated during the 2008 financial crisis when a combined 66 billion pounds was pumped into the banks to keep them afloat leaving Britain with stakes of 81 percent in RBS and 40 percent in Lloyds.
Lloyds is considering having its registered office in London rather than Edinburgh in the event of a “yes” vote, banking industry sources told Reuters last week.
RBS, whose corporate identity is synonymous with Scotland, has said it is considering the implications of a vote for independence.
A MOVE SOUTH?
Banking industry and political sources say that the British government would retain ownership of its shares in the banks in the event of a “yes” vote and that any change to the ownership would need to be negotiated between the UK and Scottish governments, something Britain's finance ministry would be unlikely to agree to.
Scotland's First Minister Alex Salmond, a former RBS economist, has said the country would officially become independent in March 2016 in the event of a 'yes' vote, giving Lloyds and RBS 18 months to assess their options.
“Given the economic footprint of the banks and the UK government holdings, we are certain that the banks would redomicile to London,” said Sanford Bernstein analyst Chirantan Barua, which estimates that would cost the banks between 500 million and 1 billion pounds.
A “yes” vote would make further sales of the government's stake in Lloyds more difficult because of the uncertainty created, according to industry sources.
A “no” vote, on the other hand, could lead to a “relief rally” that could enable London to sell more of its remaining 25 percent shareholding having already sold off a 13.5 percent stake in the past year.
A sale of the government's 81 percent stake in RBS is already seen as being three to five years away and the uncertainty would make a more immediate sale less likely.
For Scotland's investment community, there is huge uncertainty around the currency, tax and regulatory implications of independence, prompting the country's largest insurer Standard Life to warn it was prepared to move its operations south of the border if the vote impacted its business.
The regulatory jurisdiction is a key issue for insurers and pension funds. Currently, under European law, financial firms can sell their products in the European Union, but Edinburgh would likely have to negotiate its membership of the EU if it secedes.
“Sure, Switzerland and other countries have bilateral agreements which means they can piggy-back, but you've got to go through a process to reach that position, it's not a given,” said Julian Bartlett, partner at consultants Grant Thornton.
Likewise, companies in Britain with schemes that straddle both countries could be forced to reconfigure them to meet European Union rules on schemes that cross national borders, chief among them that the schemes are fully funded at all times.
As such, companies may be forced to either close existing schemes, split them into two parts or face having to pump additional funds into them to ensure they are fully-funded.
“That's the biggest concern for our members,” said Steven Dignall, Scotland representative for the National Association of Pension Funds, whose Scottish members have combined assets of more than 70 billion pounds and include employers such as Heineken and Scottish Power, part of Iberdola. - Reuters