The Banks have not exactly demonstrated their interest in providing a quality service to their customers in the past several years. As corporations, they have a duty to their shareholders but also a duty of care to us.
The Endowment Mortgage scandal, the PPI scandal, LIBOR rate rigging – for which large fines have been imposed on some of the big banks, and the toxic loans which led to the banking crisis in 2008, leaving many banks being bailed out by governments in UK, USA and other countries around the world, clearly show that bankers have been focussed on profit, huge bonuses and personal gain at our expense – as customers AND taxpayers. They invested recklessly within their investment arms for the bank, not us. It is not clear if their behaviour has changed in any meaningful form yet, judging by the excessive salaries and packages that they still pay themselves.
When a bank gets into trouble, even temporarily, they can go to the Bank of England for instant liquidity. That is one of the roles of the BofE in UK, and the Federal Reserve in America. They act as lenders of last resort. Without this guarantee, investors and depositors (you and me and all the businesses in the country) would not feel confident in leaving our cash, our wages, our pensions, our savings in that bank. This was demonstrated by Northern Rock back in 2007 or 2008 when they had to close their doors to halt a run on the bank. Remember the TV News images of long queues at branches whose doors were closed?
Imagine suddenly discovering you could not access your own money; at an ATM, say. Imagine discovering, just after your salary had been paid into your account by your employer, that none of your direct debits had been paid. That’s what happened to customers of Northern Rock. How would you cope today if that happened to you?
It took some time, but the Government intervened through the Bank of England. Confidence was restored then, though much worse was to follow; and we are still paying for it now. As we know from the bailing out of Royal Bank of Scotland and Bank of Scotland.
But an individual bank might have temporary liquidity problems which you and I may never ever be aware of, thanks to the banking system.
An Independent Scotland needs a Lender of Last Resort.
It’s been made patently clear that in the event of Scotland becoming independent, a currency union is not a viable option, for Scotland or the rest of the UK. It is not scare-mongering to keep saying this, it is not a threat, it is reality. Only the nationalists cannot see this.
You could hardly expect the Bank of England to underwrite the Scottish Banks. The remaining 58 million people in England, Wales and Northern Ireland would hardly agree to it – and it would surely be appropriate if the question does come up, that they have their say in their own referendum.
There are two ways for Scotland to have a lender of last resort (LOLT).
- VOTE NO on 18th September; with no cost and no risk – we stay in the UK; or
- Vote Yes: this would require a separate Scottish currency (Sterlingisation – using the pound informally does not achieve aLOLT); create a banking regulatory framework and establish an equivalent to theBofE. Many experts have already demonstrated that this is possible, but at huge cost and risk.That cost would be paid through taxation by the 5 million people living in this country.
Scotland is a great nation, contributing significantly to the greatness of the United Kingdom and benefitting from the security provided by Great Britain and Northern Ireland.
Let us keep it that way for the good of us all. VOTE NO on 18th September.