Calls To Split Up RBS

Radical plan for re-organisation of Scottish banks in the event of a 'yes' vote.

Options for Scotland today published a comprehensive plan for the re-organisation of the Scottish Banking industry after independence. Written by Ian Blackford who has 30 years of experience in the banking and investment banking industry, the plan analyses the current position where despite popular assumptions, Scotland has no indigenous banks controlled from within Scotland and contains nine options for reorganising the industry in the event of independence.

Commenting Ian Blackford stated:

"Banking and financial services in Scotland employ around 100,000 directly and around the same number again indirectly. We also have 24% of those in the UK employed in the life assurance sector and around 13% of all UK banking employment. It is therefore one of Scotland's most important industries.

"There are no UK plans to spin off the Scottish sections of banks like RBS and Lloyds who are no longer run from Scotland. 
"The legacy of the financial crisis of 2007-8 is still with us, the UK banks are constrained by the failures of the past.  We need to create the circumstances that will lead to a competitive banking market in Scotland. Independence will give Scotland the opportunity to restructure the former Scottish banks and return to them the power to contribute more sensitively and relevantly to the priorities of reviving Scotland’s economy than is the case at present.  

"In my view the importance of the Scottish financial services industry needs to be recognised by any incoming Scottish government. All of Scotland’s political parties need to be pressed to outline their plans for the industry post-independence. It cannot be left to the SNP Government alone."

Gordon Wilson, Director of Options for Scotland and former SNP Leader added:

"For most of the referendum campaign, the position of the major Scottish Banks has been 'scaremongered' on the basis that an independent Scotland would be unable to cope with the risks of a future banking crisis, given that the country at face value possesses a higher ratio of banking activity than rUK. On the contrary, the problem facing Scotland is the reverse. 

"Most of the major banks, as will be seen, are controlled from London Headquarters. We have too few indigenous banks and too many which have 'brass placques' nailed to their nominal Scottish head offices. This report seeks to looks at the prospects of nurturing and expanding this vital industry so that it can develop and expand both domestically and globally. Scotland needs to have more vision and confidence for the future. Ian Blackford has produced an important outline blueprint of what can be done."

Ian's paper calls for the spinning off of the Scottish banking services of RBS and retention of a Scottish stake in the assets and liabilities of the RBS 'bad bank' run as it is on a UK basis at present. As it is in majority UK government control, this could be done in the negotiations following independence. With Lloyds Bank, owner of the Bank of Scotland, the position is different since the Government has only a minority stake and Lloyds would need to be persuaded that the flotation of the Bank of Scotland as an entity in which they would retain an interest at their discretion would be beneficial for their business as well as for Scotland. Ian Blackford has also looked at the Clydesdale currently up for sale. Its flotation in Scotland once it returns to financial health would give Scotland a strong competitive and indigenous banking tripod on which to build.

With his experience in merchant banking, Ian Blackford looks at the Scottish investment Bank, part of Scottish enterprise, investing in 237 companies in 2012, generating £375million in turnover and which employ 3942 people. Blackford regards this as having a pivotal role in acting as a catalyst to focus investment both in business start-ups and in existing business with growth potential. He recommends that this should become a stand-alone investment bank with capacity for equity and fund growth. The Scottish Government would retain majority control.

The paper also looks at the wider fund management, life assurance and investment administration sectors and recommends that work begin on devising what appropriate taxation regime would foster growth of the wider industry. Blackford suggests the Scottish Government's independent fiscal commission be invited to initiate studies into appropriate measures.

The Paper recommends consideration of the following nine options:

• It is in the interests of both Scotland and rUK that RBS be broken up into its constituent parts.
• When the Scottish banking assets of RBS are spun off from the existing RBS group, the Scottish Government will inherit a majority stake in the new Scottish Bank. The Bank should be listed on the stock market and have its head office in Scotland.
• The RBS 'bad bank' containing the dubious loans should be ring fenced on a rUK basis with the Scottish Government inheriting a proportionate share of the assets and debts until the purposes of the ‘bad bank’ are resolved.
• The new Scottish Bank should be returned fully to the capital markets as soon as practical with the intention of delivering a return to the Scottish exchequer on the inherited investment and freeing up assets to pay down debt and re-investment in Scotland. 
• If and when possible, the Bank of Scotland element in Lloyds Group should be spun-off so that it can resume its primary task of serving Scottish consumers and providing competitive services relevant to its business and domestic customers in Scotland.
• With National Australia Bank (NAB), owners of Clydesdale Bank, wishing to off-load its Clydesdale and Yorkshire Bank subsidiaries, it should be the aim of a Scottish Government (if no purchaser for the Clydesdale is found) to persuade NAB to follow an alternative path of floating the Clydesdale (with or without the Yorkshire Bank) as and when Clydesdale’s financial health improves.
• The Scottish Investment Bank should be spun-off from Scottish Enterprise and as a fully fledged investment bank should be listed on financial markets and enabled to seek additional capital funding. The Scottish Government should retain majority control.
• The Scottish Government should review its taxation strategies to encourage longer term investment, employment and sustainable growth within the financial services, fund management and pension funds industries.
• The Scottish Government's independent Fiscal Commission should be asked to devise measures to achieve these goals.