Scotland’s plan to keep the Bank of England as the lender of last resort and to influence its policy making should nationalists win their bid for independence is “implausible” and “fanciful,” a panel of lawmakers said.
Voters in Scotland will decide in a referendum set for Sept. 18, 2014, whether to leave the 306-year-old U.K. The semi- autonomous government in Edinburgh has proposed that the new state would continue using the pound and become a shareholder in the central bank, which would oversee Scottish lenders.
In a report published today, the Economic Affairs Committee of Britain’s upper House of Lords said the requirements of joining the European Union would mean Scotland would need its own financial regulator. This would create a situation where Scotland’s banks had two regulators in different countries.
This proposal “implies that the Bank of England would accept risks over which it had little control, which seems implausible,” the report said. On the idea of giving Scotland a share in the bank, it concluded: “We do not see why the U.K. government would agree to this proposal.”
Scottish insurance companies, which sell more than 90 percent of their products to the rest of the U.K., would face additional compliance costs and complexity from having two regulators, according to the panel.
“The proposal for the Scottish government to exert some influence over the Bank of England, let alone the rest of the U.K. exchequer, is devoid of precedent and entirely fanciful,” the committee said in the report.
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