Bank of England gives 'reassurance' on Scottish independence vote

Mark Carney

So, now we know. After much speculation and oblique references, Mark Carney has made it clear. The Bank of England has contingency plans whatever the outcome of the Scottish referendum.

This is what he said at the Inflation Report press conference this morning. The words are significant, and are his strongest on the issue of post-referendum planning.

"In terms of the financial stability questions - whatever happens in the vote, the Bank of England will continue to be the authority for financial stability for some period of time, certainly over the interim period."

In short, on the day after a referendum vote - if it's a yes to independence - nothing actually changes.

The Bank of England remains the lender of last resort to Scottish financial institutions and the guarantor of the currency during the period of negotiation over how Scotland and the rest of the United Kingdom separate.

Start Quote

We don't get a vote in this and we don't want a vote”

End Quote Mark Carney Bank of England Governor

"We will look to discharge our responsibilities accordingly," Mr Carney continued.

"Uncertainty over the currency arrangements could raise financial stability issues. We will - as you would expect us to have - contingency plans for various possibilities."

Currency uncertainty

At this stage, Mr Carney is not going to tell anyone what they are.

"It's never good to talk about contingency plans in public other than to assure that we have contingency plans."

Sources in the financial world have told me that the plans are likely to focus on two issues - currency uncertainty and what is known as "deposit flight".

I asked the Governor directly about both, and specifically fears raised in a recent report by UBS that in the event of a yes vote on independence, customers of financial institutions based north of the border may decide to move their money southwards.

Some leading executives in the financial world are so concerned they had been hoping for a message of reassurance from the Bank.

'Yes' Campaigners 'Yes' campaigners said Mr Carney's comments were reassuring

Mr Carney suggested he was across the issue, which I have been told by senior banking figures is of concern to at least four major financial institutions which are based in Scotland.

"In terms of our responsibilities for financial stability - we have a wide range of tools," the Governor said in response to my question.

"We are not the only authority that has responsibility for financial stability - some of the powers that we have are held jointly with Her Majesty's Treasury - so we are not the sole decision maker in the process."

His views will be welcomed by campaigners for a "yes" vote who will play up the reassuring nature of the Governor's words.

And will spark a sigh of relief among those same Scottish-based major financial institutions I have been talking to which are fearful of customer reaction should there be a vote for independence.

There has been much debate - to put it mildly - on the currency relationship between Scotland and the rest of the United Kingdom in the event of a yes vote.

Will Scotland still use sterling? And if they do, how? The three main political parties in London have said they are against a "currency union".

The Scottish Government has made it clear it still wants to use sterling.

'Better Together' campaigners The 'Better Together' campaign said Mr Carney's remarks confirmed he would implement whatever currency union he was asked to by politicians

Alex Salmond and Alistair Darling have, ahem, rather different views on the matter.

You can read about their fiery exchanges in last week's STV debate here.

Financial stability

Mr Carney made it clear, once again, that whatever the outcome, the Bank is ready.

"We don't get a vote in this and we don't want a vote," he said of the referendum.

"The Bank has operational independence in the conduct of monetary policy - others, that is elected officials make decisions about our remit, our mandate.

"They will make the decisions about the currency - whether or not there is a currency union between Scotland and the rest of the United Kingdom in the event of a yes vote in the referendum.

"We do take note of the decisions of the three main Westminster parties to rule out a currency union, I will reiterate that we will implement whatever we're asked to implement.

"We have responsibilities for financial stability in the United Kingdom, we will continue to discharge those responsibilities until they change. We will continue to discharge those responsibilities regardless of the outcome of the vote on the 18th September."

The UK government has always insisted that it is not contingency planning for a yes vote. The Bank, it seems, is.

Kamal Ahmed Article written by Kamal Ahmed Kamal Ahmed Business editor

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  • rate this

    Comment number 139.

    Presumably, if the vote is 'No' Mr. Salmond will resign the following day?

  • rate this

    Comment number 138.

    106. stanilic

    Does the Yes campaign actually understand what independence means? ....


    No. They think `Braveheart` was a documentary, the Battle of Bannockburn was yesterday, that Scotland joined the Union because its bankers sold them out and not because their American fiasco left them bankrupt.

    They think that Carney has just promised to continue to subsidise their clapped out economy.

  • rate this

    Comment number 137.

    we already have a pound, it says bank of Scotland or clydedale on mine, at the moment its a british pound underwritten by the bank of England, if we leave britain it wont be british and wont be underwritten by boe. of course we can keep it, and if wee eck wants parity he will have to pay for it as they do in the iom, because the Scottish pound will devalue. vote yes for la la land and disaster

  • rate this

    Comment number 136.

    Vote yes in 2014 ....and watch the Westminster parties fight among themselves in 2015 to offer Scotland the toughest possible exit terms.

  • rate this

    Comment number 135.

    Bankers are crackpots!

    The truth that they fail to understand is that ever cheaper money LOWERS growth. It does not raise growth.

    (This is why - and is proven by - the BoE, Fed & ECB policy of free money has been and remains a dismal failure.)

    To raise growth they must raise rates.

    (The reasoning is due to the investment economics dynamics of free money.)

    Raise rates and raise growth!


Comments 5 of 139


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