The government’s report into the effects of an independent Scotland on the financial services sector, Scotland analysis: Financial services and banking, said Scotland would have to set up a separate regulatory regime should it decide to leave the UK, which would mean higher costs and more compliance burdens for firms.
Should the independent country join the European Union, the report claimed, it would have to go even further and establish its own financial regulator.
Both systems would require firms operating across the UK to pay two lots of regulatory costs and have a passport to trade between the two regulatory systems.
The report warned: “Independence would create separate regulatory and tax regimes under separate governments. These regimes would be likely to diverge over time; creating barriers to trade that do not currently exist.
“International experience shows that borders reduce flows of products, money and people.”
The report also warned that Scotland could struggle to set up an effective compensation scheme – such as the Financial Services Compensation Scheme (FSCS) – to protect customers should firms fail.
It said: “A financial compensation scheme in an independent Scotland would cover far fewer firms (than the FSCS), and would be dominated by two large banks. If one of those banks were to fail, any similar scheme would struggle to compensate savers.”
Scotland’s two dominating banks are the Royal Bank of Scotland and Lloyds Banking Group.
