Uncomfortable moments north of the border

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Uncomfortable moments north of the border

The likeness between Sir Bruce Pattullo, governor and group chief executive of the Bank of Scotland, and Mel "Braveheart" Gibson may not be immediately apparent to fans of tartan lore. Judging, however, by the way Sir Bruce yesterday flounced off the board of Britain's leading life mutual, he might have been cast in the role of William Wallace to that of Norman "Robert the Bruce" Lessels, the chairman of Standard Life. The message conveyed with determination over recent days that all is bonny between these two august Edinburgh houses is fast coming apart at the seams.

The reality is that the Bank of Scotland is running scared and feels more than a little betrayed. It was informed some while ago that Standard Life intended to sell all or part of its 32.5 per cent stake. The stake had become too large for a properly balanced investment portfolio. Moreover, the originally hoped for commercial ties never developed. But the bank never faced up to the reality of the unthinkable occurring.

With the sale, the Bank of Scotland, the smallest of the eight big British banks, will be bereft of the protective shield it has enjoyed for the past decade. For all its strengths as a well-run regional bank, with some not altogether persuasive international add-ons, it will be vulnerable amid the powerful forces at work in Britain's rapidly changing retail financial services landscape.

Judging by the faint rise in the share price, the market believes the near-pounds 1bn stake, or whatever portion Standard Life decides to flog, will be quietly placed among institutions according to the unwritten codes of Fortress Scotland. Such a cautious reading of events may be correct, for way back in the early 1980s competing bids for Royal Bank of Scotland were blocked on the grounds that Scotland needs her independent companies. Scottish sensitivities, and the fact that all the main political parties need to pander to them, have if anything grown since then so it may be even harder to breach the Scottish ring-fence these days.

But that won't stop either Barclays or HSBC, both of which have informally declared an interest in Bank of Scotland, from dusting off their dossiers. Standard Life, too, will want to take a robust view of doing best by its policyholders, which could mean thinking hard about a single offer for the stake. The market may have to rejudge this one. Old Longshanks won't be giving up that easily.