OUTLOOK: RBS may want to move, but England may not want it

 

Outlook Business leaders would probably be best off steering clear of the Scottish independence referendum (I'm looking at you, Bob Dudley from BP).

A choice such as that being offered by this plebiscite will be decided primarily by emotion, and negative ones tend to be stirred up when wealthy businessmen start moaning or even threatening. But politicians need to choose their words with care too, particularly in this space.

Which is why Vince Cable's warning that an RBS left "more exposed than Iceland's institutions" would have to quit Edinburgh in favour of (most likely) England in the event of a "yes" vote isn't helpful to those massed behind the "better off together" banner. Even though he raises a valid point.

The rump UK would baulk at a currency union with Scotland without guarantees on spending, debt and the like. Having kept the UK out of the euro, it would be folly to allow a mini version of its crisis to develop were one of the members of a newly created sterling zone to live beyond its means and threaten to bring the house of cards crashing down as a result.

However, were the UK to respond to Scotland walking out by kicking it out of sterling, it does raise a question for the customers of Scotland's big banks (because Lloyds too is headquartered there). Would you want to park your money with an institution based in a country that wouldn't be able to bail out your deposits were it to go wrong (and which would be overseen by a new, untested, regulatory set-up)?

This is less of an issue for Lloyds, which is more or less stable now, but RBS has just warned of losses that could reach £8bn for 2013 thanks to past misdeeds, losses which won't nearly be covered by operating profits. And we're still awaiting a report into the activities of its Global Restructuring Group, commissioned by watchdogs in the wake of accusations of malpractice.

The Business Secretary said, based on this, that it would be "logical" for RBS to move its headquarters out of the country whose name it bears. But given the state that RBS is in, wouldn't it be just as logical for the remainder of the UK to resist any plans to locate the bank south of the border?

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