Will Scottish savers be protected after the referendum? Uncertainty comes out

The Guardian: There is uncertainty about how Scottish savers will be protected after a vote for independence, admits the UK body which guarantees deposits up to £85,000 in bank accounts, althought it expects a transitional arrangement to be put in place.

The Financial Services Compensation Scheme promises to back the equivalent of €100,000 held in bank accounts in the UK, as part of arrangements put in place across the EU after the 2008 banking crisis.

Amid concerns about a flight of deposits from Scottish bank accounts if next week's referendum produces a yes vote, the FSCS admitted: "We cannot speculate at this time on what the Scottish referendum might mean for consumers. This will depend on decisions to be taken by the Scottish government. However, EU directives place a clear requirement on countries in the EU to provide a deposit scheme. The current European limit is €100,000."

The FSCS added: "The matter of Scottish independence is for the Scottish voters to decide. If the vote is in favour of Scottish independence, there is likely to be a transitional period. During any such period, we expect consumers will continue to be protected by the FSCS as at present, and compensation cover would continue unaffected." The prospect of continued protection may help soften uncertainty about post-poll banking arrangements amid warnings of capital flight should vote yes.

Pound trembling

Moreover, currency uncertainty is fuelling warnings about capital flight, with analysts such as Sandy Chen at stockbroker Cenkos basing his analysis on his personal experience of living in Prague after the Slovak vote for independence. "The Czechs and Slovak put in place a transitional monetary union that was intended to last at least six months; it broke up after only a month, driven by large deposit outflows from banks in Slovakia," Chen said this week.

A YouGov poll on Sunday, which showed the yes camp ahead for the first time, has focused investors on the potential fallout, leading to a weakening of sterling and a drop in the share prices of companies related to Scotland.

There are fears that mortgage lenders will become more cautious about handing out home loans in Scotland and one industry insider said there were also signs that commercial deals were being put on hold until the outcome of vote.

Scotland might fall into a "deep recession"

Analysts at Credit Suisse warned on Tuesday that Scotland would fall into a "deep recession" in the event of yes vote. "We think deposit flight is both highly likely and high problematic," the Credit Suisse analysts said, pointing out bank assets were 12 times Scottish GDP. "And should the Bank of England move to guarantee to Scottish deposits, we expect it to extract a high fiscal and regulatory price."

The Japanese investment bank, Nomura, has also advised clients to cut their exposure to the UK.

Analysts at Barclays said the Bank of England would "communicate" with markets the day after the referendum. "In the event of a yes vote it will likely adopt a reassuring tone. In our view, one of the main reasons that panic is not warranted is that even if there is a yes vote, Scotland will remain within the UK for at least 18  months, leaving quite some time to settle differences," the analysts said.

Governor of the Bank of England Mark Carney will appear before the Treasury select committee of MPs later on Wednesday. The MPs extracted details from John Griffith-Jones, chairman of the Financial Conduct Authority, about "some basic contingency planning" that the regulator had embarked upon when he appeared before them on Tuesday.

Griffith-Jones said the FCA was taking steps to ensure it had phone lines which were "properly manned" to deal with customer queries asking "what should I do?".

Among the plans were "making sure that phone lines are properly manned if people ring ... making sure we have a position around what advice would be appropriate to be given on day one were to consumers to ask what should I do on day one".

Carney has not yet disclosed details of contingency planning by the Bank but on Tuesday tackled the currency question. He warned that currency union was "in compatible with sovereignty" and set out three elements for successful currency union: free movement of capital; banking union; and fiscal arrangements over tax and spending. Nine months ago, Carney had said that Scotland might have to cede some sovereignty.