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Scottish bank customers warned over deposit protection scheme Scottish bank customers warned over deposit protection scheme
(4 months later)
Bank customers and pensioners in Scotland would be less well protected if the country voted to leave the UK, a report warned on Monday.Bank customers and pensioners in Scotland would be less well protected if the country voted to leave the UK, a report warned on Monday.
The analysis, part of the Treasury's look at devolution's impact, says an independent Scotland could have significant difficulties providing standalone protection to match the current Financial Services Compensation Scheme (FSCS), which protect deposits in UK banks up to £85,000.The analysis, part of the Treasury's look at devolution's impact, says an independent Scotland could have significant difficulties providing standalone protection to match the current Financial Services Compensation Scheme (FSCS), which protect deposits in UK banks up to £85,000.
An independent Scottish retail banking sector would be dominated by two large banks – Bank of Scotland and Royal Bank of Scotland. If one of these were to fail, the report suggests, almost all of the costs for compensating depositors would fall on the remaining firm, and that could lead to more concern among deposit-holders.An independent Scottish retail banking sector would be dominated by two large banks – Bank of Scotland and Royal Bank of Scotland. If one of these were to fail, the report suggests, almost all of the costs for compensating depositors would fall on the remaining firm, and that could lead to more concern among deposit-holders.
The report – the Scotland Analysis Paper on UK Consumer Protection – says: "As was clear from the 2008 financial crisis, where there are doubts about the ability of the sector to meet claims through the compensation scheme, it can be necessary for governments to step in to guarantee deposits in order to prevent deposit flight."The report – the Scotland Analysis Paper on UK Consumer Protection – says: "As was clear from the 2008 financial crisis, where there are doubts about the ability of the sector to meet claims through the compensation scheme, it can be necessary for governments to step in to guarantee deposits in order to prevent deposit flight."
The Treasury also warns that the UK's Pension Protection Fund (PPF) would not cover Scottish pension-holders post-devolution. Such schemes are mandatory under EU law, so an independent Scotland could need to create a guarantee fund.The Treasury also warns that the UK's Pension Protection Fund (PPF) would not cover Scottish pension-holders post-devolution. Such schemes are mandatory under EU law, so an independent Scotland could need to create a guarantee fund.
The report says this would be difficult as Scotland is home to only a small number of the UK's defined benefit schemes, which help fund the PPF through a levy.The report says this would be difficult as Scotland is home to only a small number of the UK's defined benefit schemes, which help fund the PPF through a levy.
In conclusion, the report argues it would be less efficient and cost-effective for Scotland to replicate current UK consumer protection schemes.In conclusion, the report argues it would be less efficient and cost-effective for Scotland to replicate current UK consumer protection schemes.
"Should Scotland become independent, it would be more expensive to achieve a level of consumer protection equivalent to that which currently exists," the report says."Should Scotland become independent, it would be more expensive to achieve a level of consumer protection equivalent to that which currently exists," the report says.
This is the Treasury's third foray into the implications of Scottish independence. Last month it questioned if a formal currency union with an independent Scotland would suit all the UK. George Osborne suggested a new sterling currency union could be too risky, prompting SNP leader Alex Salmond to tell to tell the chancellor to "grow up".This is the Treasury's third foray into the implications of Scottish independence. Last month it questioned if a formal currency union with an independent Scotland would suit all the UK. George Osborne suggested a new sterling currency union could be too risky, prompting SNP leader Alex Salmond to tell to tell the chancellor to "grow up".
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