Independent Scotland's FIAT currency - when should I move my savings?

Archi_Bald

Linton wrote: »

"HBOS plc is a direct subsidiary of Lloyds Bank plc and a wholly owned indirect subsidiary of Lloyds Banking Group plc." Lloyds is currently registered in Scotland which means I believe it is subject to Scottish Law at the corporate level. However it is regulated by the UK government.

Regulation is all that matters to the investor. The Regulator takes care of whether the legal pre-reqs are being met.

As and if there is an iScotland, the existing UK Regular will obviously no longer be able to service both, iScotland and rUK. FCA and PRA are UK bodies that can continue to regulate rUK business but they couldn't regulate anything in iScotland. FSCS is a UK scheme that would need to be split into relevant iScotland and rUK bits, as there is rUK and scottish money in the FSCS. I believe John Swinney and Alex Salmond said that FCA and PRA as well as FSCS would be replicated 1:1 in iScotland but details of this have yet to be confirmed.

For any investor, the basic principles seem clear: keep your money in the jurisdiction you live in, and/or in any foreign jurisdiction you have confidence in would look after your interests. As it happens, after Iceland and Cyprus and the continuing Euro crisis, I have zero confidence in any foreign jurisdiction, including iScotland. I also firmly believe the majority of investors share my views when it comes to their own money. So a financial flight from iScotland would seem inevitable. This would be accompanied by scottish-based institutions seeking to protect their overall shareholder propositions but not having any choice other than making sure they have an rUK licence. An rUK licence would also mean they'd need substantial funds domiciled in the UK, as well as paying corporation tax in the UK and contributing to the UK FSCS (basically just as they do under their current licence, but without the option to move any funds to iScotland. Just as Santander UK is unable to move any funds to Spain).

My view is that the rUK investors would come out of this without any disadvantages, despite a significant amount of admin and control needing to happen. I am not so sure iScotland investors could say the same as there are far fewer of them and the affordability of an FSCS-like scheme in iScotland is far less assured than in the present UK, and in rUK, simply because the iscottish financial industry would have far less money overall, and would therefore only be able to assume fewer risks.

(am awaiting the bullying attacks from the cybernats who haven't yet thought through the consequences of rUK investors wanting to repatriate their funds).

Chadsman

CLAPTON wrote: »

a somewhat unclear directive

Robert Peston says...

as I understand it, they [PRA and FCA] think this directive broadly implies that a bank must have its legal home in the country where it carries out the bulk of its activities - which in this case (to state the obvious) is England (or rather the rest of the UK, excluding Scotland).

Linton

Chadsman wrote: »

Robert Peston says...

as I understand it, they [PRA and FCA] think this directive broadly implies that a bank must have its legal home in the country where it carries out the bulk of its activities - which in this case (to state the obvious) is England (or rather the rest of the UK, excluding Scotland).

Does that preclude a bank with a legal home in one country where it does most of its business being a wholly owned subsidiary of another company, perhaps a bank, located elsewhere? eg the Yorkshire Bank is "a legal entity" of Clydesdale Bank PLC. Clydesdale Bank PLC, is registered in Scotland and covered by FSCS, but is wholly owned by the National Bank of Australia.

CLAPTON

Chadsman wrote: »

Robert Peston says...

as I understand it,

that seems very unclear and needs a lot of understanding given the global reach of many banks




to my mind the key issues are


-who bails out a failing bank and
-who is lender of last resort

Chadsman

...err maybe.
The lawyers will get rich arguing about it- that I do know.

bigheadxx

TCA wrote: »

You might find this of interest:

http://www.huffingtonpost.co.uk/gordon-macintyrekemp/scottish-independence-bank-bailout_b_4895234.html

Only in the fact that it is nothing to do with the bail outs being discussed. That figure is the total amount borrowed, not that which was outstanding at any one time. These borrowings were mostly short term lending to ease cash flow and not a permanent liability on the Federal Reserve balance sheet.

Archi_Bald

Linton wrote: »

Does that preclude a bank with a legal home in one country where it does most of its business being a wholly owned subsidiary of another company....

Most definitely not, no, this sort of thing is exactly what successful international companies are doing. But the incorporation of a financial institution is pretty much irrelevant to an investor. What counts are the details of their licence terms in individual countries.

Reputable financial institutions will afford a licence to operate in a given jurisdiction, and will fully participate in the financial framework of the country they wish to operate in.

Examples:

1. Banco Santander's subsidiary, Santander UK plc, operates under a full UK licence and a full FSCS guarantee. I am happy to put £85K of my cash in there, just as I am happy to put £85K into the likes of Nationwide since both of them participate fully in the financial framework of the UK
   
   If they go bust, I just sit back and up to £85K of my money will be totally safe. As I never put more than £85K into them, all my money with them is safe. Simple, I can cope with that easily. Most UK savers/investors can copy easily with the FSCS.
   
   
2. Triodos, a dutch "ethical" bank, is "authorised by the Dutch Central Bank and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority". They are not part of the UK FSCS, i.e. they do not participate fully in the financial framework of the UK.
   
   If they got bust, I need to apply to the dutch compensation scheme, and I can't rely on getting any help from the UK government, or from any EU body (and particularly not if the UK left the EU). Even if Triodos had any attractive offerings, I would not put a single penny into their accounts, not after the Icesave debacle. I simply could not cope with the stress and uncertainty of a foreign regulated financial guarantee system. Note I am an avid supporter of UK's membership in the EU but in the first instance I am a UK resident and therefore look to UK laws and regulations for protection of my interests.

Just to clarify, I have nothing against the dutch, and I don't think the dutch have anything against the UK. We just have different financial guarantee schemes in the UK and in Holland. Just like any other EU country has their own financial guarantee scheme. I wouldn't expect any citizens of other countries to expect the FSCS to pay out to them if any of the UK banks default.

kangoora

TCA wrote: »

You might find this of interest:

http://www.huffingtonpost.co.uk/gordon-macintyrekemp/scottish-independence-bank-bailout_b_4895234.html

I have to laugh at the conclusions

Conclusion
Next time you hear someone say an independent Scotland could not have afforded the banking bail out, remember how the US Federal Reserve bailed out Barclays to the tune of £552.32bn. Ask them if they think Scotland would have made the same bank regulation mistakes as the city of London led Westminster government?

So, their conclusion is that omniscient, superior Scottish bankers and politicians would never make the same mistakes as those crass, useless politicians and bankers in London.

Utter bullc**p, bankers and politicians all over the world have been sucked into various scandals, errors and just plain idiocy as long as banking and politics have been invented and those in Scotland would be no different to any others.

Linton

Archi_Bald wrote: »

Most definitely not, no, this sort of thing is exactly what successful international companies are doing. But the incorporation of a financial institution is pretty much irrelevant to an investor. What counts are the details of their licence terms in individual countries.

Reputable financial institutions will afford a licence to operate in a given jurisdiction, and will fully participate in the financial framework of the country they wish to operate in.

Examples:

1. Banco Santander's subsidiary, Santander UK plc, operates under a full UK licence and a full FSCS guarantee. I am happy to put £85K of my cash in there, just as I am happy to put £85K into the likes of Nationwide since both of them participate fully in the financial framework of the UK
2. Triodos, a dutch "ethical" bank, is "authorised by the Dutch Central Bank and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority". They are not part of the UK FSCS, i.e. they do not participate fully in the financial framework of the UK.
   
   If they got bust, I need to apply to the dutch compensation scheme, and I can't rely on getting any help from the UK government, or from any EU body (and particularly not if the UK left the EU). Even if Triodos had any attractive offerings, I would not put a single penny into their accounts, not after the Icesave debacle.

Exactly (my question was rhetorical) - why would an English bank operating in Scotland or a Scottish bank operating in the UK be regarded any differently.

Marazan

Whilst, for example RBS has it's registered office in Edinburgh its tax paying office and location for regulation is London - if you don;t believe me then look at the dis-aggregated accounts for the uk as produced by HMRC ( https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/246077/disagg-method.pdf )

In table 9 on page 10 Scotland's contribution to onshore Corporation tax is listed. In 06-06 and 06-07 Scotland had approx 2.7 billion in corp tax receipts. RBS, in it's 2005 accounts, had a net Corp tax bill of 2.3 billion, HBOS a further 0.8 billion.