Acutely observed article as always on this blog, thanks Blair. It's worth making clearer that the BoE acting as lender of last resort is a different thing to it providing QE. Having a central bank acting as lender of last resort is what potentially keeps the banking system going through a 2008 type crisis. QE, when done well, is a way of increasing money supply in the economy as a means of mitigating a recession, or it can be used to fund Govt spending directly such as with the coronavirus bail out scheme.
The lack of both would be hugely problematic if Scotland leaves the UK with sterlingisation, as you point out.
There are two other equally important problems stemming from the same root which get much less airtime.
The first is that within months the Scottish banking system will simply run out of pounds under sterlingisation, unless the BoE decides to grant it lines of liquidity.
The second is that the is no financial regulator in Scotland, and I suspect that there is little expertise of financial regulation in the Scottish Parliament. Of course a regulator would be set up, but it would take many years to establish credibility, and it would need a mutual recognition agreement with the UK regulators, which looks unlikely if Brexit is anything to go by. Without that, a big chunk of Scotland's financial services industry would start shifting rapidly south. This is 8% of GDP and likely a higher proportion than that of tax revenues.
Nicola Sturgeon was also quite wrong when she said on the Today programme that Bank of Scotland, or NatWest as it now is, would only move it's registered office to London, and that it wouldn't move any jobs. To believe that is to next to nothing of how financial regulation works.
Simply brilliant Blair, as always
Acutely observed article as always on this blog, thanks Blair. It's worth making clearer that the BoE acting as lender of last resort is a different thing to it providing QE. Having a central bank acting as lender of last resort is what potentially keeps the banking system going through a 2008 type crisis. QE, when done well, is a way of increasing money supply in the economy as a means of mitigating a recession, or it can be used to fund Govt spending directly such as with the coronavirus bail out scheme.
The lack of both would be hugely problematic if Scotland leaves the UK with sterlingisation, as you point out.
There are two other equally important problems stemming from the same root which get much less airtime.
The first is that within months the Scottish banking system will simply run out of pounds under sterlingisation, unless the BoE decides to grant it lines of liquidity.
The second is that the is no financial regulator in Scotland, and I suspect that there is little expertise of financial regulation in the Scottish Parliament. Of course a regulator would be set up, but it would take many years to establish credibility, and it would need a mutual recognition agreement with the UK regulators, which looks unlikely if Brexit is anything to go by. Without that, a big chunk of Scotland's financial services industry would start shifting rapidly south. This is 8% of GDP and likely a higher proportion than that of tax revenues.
Nicola Sturgeon was also quite wrong when she said on the Today programme that Bank of Scotland, or NatWest as it now is, would only move it's registered office to London, and that it wouldn't move any jobs. To believe that is to next to nothing of how financial regulation works.