Scottish Independence?

10 December 2013

The Scottish National Party (SNP) has formally issued its proposals for an independent Scotland.

Amongst the 670 pages were its plans for the regulation of Scotland's substantial financial services industry.

Most of us are familiar with RBS, HBOS and other famous Scottish banking brands. There are some big insurers too, including Standard Life, Scottish Widows, Aegon UK and Bright Grey (part of the Royal London Group). How would these large entities be overseen and regulated in a post-independence world?

The SNP's position is simple – keep the PRA (along with the Bank of England) as prudential regulator, but give Scotland its own conduct regulator.

But how would this work in practice? How in particular would this regime deal with the fact that most of their customers would be English?

If Scotland is to become a member of the EU in its own right, then presumably such cross-border business will require a single-market passport.

But who would be doing what? The general rule is that it is for the "home-state" to oversee prudential matters and for the host state to oversee conduct matters .So if the PRA will be handling the former and (given that the bulk of their customers will be English) the FCA will be leading on the latter, then we would in fact see very little change indeed –no doubt just how SNP would like it …