Bank of England reveals details of contingency plan over Scotland's possible ''Yes'' vote

11 October 2014

The Bank of England has revealed details of the emergency plan it would have put in place in the event of a 'Yes' vote during the Scottish independence referendum, The Independent reported.

The BoE would have pumped millions of pounds into the financial system to ensure liquidity and would have issued extra notes to cope with higher demand from Scottish deposit holders.

It would have also prepared to stand by notes issued by Scottish banks in an attempt to reassure the public there would no immediate changes in an effort to prevent a potential flight of deposit.

Unlike England and Wales, where all bank notes were issued by BoE, Scotland had different types of bank notes issued by Scottish banks, that were guaranteed by deposits at the Bank of England.

"Under current arrangements, Scottish banknotes are backed fully by their issuers' holdings of Bank of England notes, UK coin and deposits at the Bank of England. This would have been a key public message in the event of a Yes vote," the BoE said.

A vote for independence would have seen the Bank issue a statement "reaffirming its responsibilities for financial stability, prudential regulation, banknotes and monetary policy in the entire United Kingdom, including Scotland" until independence came into force.

According to the BoE it was ready if Scottish bank depositors and creditors feared their money was unsafe because an independent Scotland might have eventually adopted a new currency.

The bank added a 'Yes' vote would have seen it  announce two extra operations to pump money into the financial system and it would have been ready to supply more cash to Scottish banks Reuters reported.

"If depositors, policyholders and other creditors believed that an independent Scotland would adopt a new currency, they might have preferred not to take the risk that their assets might be redenominated into that new currency," the BoE said.

"The (BoE) had been discussing with firms how they would manage their potential currency exposures," the BoE said, adding that "a key element of ... contingency planning work concerned the potential provision of liquidity support to individual institutions".


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