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What’s worse, asks ScotBuzz editor Bill Jamieson, the shrinking of a bank that really existed? Or the vanishing of a bank that never was?

Last weekend’s Sunday Herald brought us up to speed with latest developments at the sonorous-sounding Scottish Business Development Bank (SBDB).

Business folk scratched their heads. Er, was that the big new block in Charlotte Square? Or that shiny glass and steel edifice in Glasgow’s Atlantic Quay?

Or perhaps it was a virtual bank, an online website thing complete with impenetrable jargon, loan application forms and multiple malfunctions?

The paper’s intrepid Business Editor Colin Donald revealed that the “SBDB”, referred to in Scottish government announcements for almost a year, not only did not exist, but is also never likely to see the light of day.

Is Scotland’s business community reeling in shock at the revelations?

It’s a fair bet few had ever heard of it – and fewer still were holding its breath for its grand opening.

The proposed formation of such a bank was unveiled in May of last year as part of a “package of measures” (do measures come in any other form?) in the Scottish Government's banking strategy. It was reaffirmed in last September's draft budget announcement.

That the latest news is that it will not now be going ahead might have been gleaned from the high and rapid clicking noise emitted from the initial statement when scanned with the Scot-Buzz  Buzzword Bingo Geiger Counter.

“The Scottish Government today published proposals that should form the foundation of a healthy, diverse and competitive banking sector in Scotland which puts the needs of its customers first. Sustainable, Responsible Banking: A strategy for Scotland, developed in consultation with industry, consumer groups and others, outlines a range of measures that can be taken in the current environment to encourage diversity in the sector and enhance professional standards.”

Welcoming the Banking Strategy Finance Secretary John Swinney said at the time, “This strategy is the first of its kind for banking in Scotland.  Banking plays a core role in supporting our economy, and our society and has a major part to play in securing our economic recovery. 

 “This strategy is focussed on improving our economic growth now and ensuring people have access to the financial services they need to support households and communities across the country.”

Measures included “Developing options to further promote community banking and other financial institutions to provide greater diversity in banking products and services to meet the needs of  a wide range of customers; working with the Chartered Banker Institute and the banks in Scotland to ensure that banking is recognised as a profession and that bankers should be appropriately qualified and should adhere to professional standards; encouraging the banks to work with public agencies, to enhance the quality of SME loan proposals.”

What a very good thing we didn’t have to wait for “Scottish Business Development Bank” to open its doors for the economic recovery to arrive.

In fact the recovery has proceeded without the grand opening. As for working with the Chartered Institute to ensure bankers are “appropriately qualified”, it is already well down that track without help from this non-existent institution. It didn’t help in retrospect that the Scottish Government paper on Sustainable Responsible Banking cited the Co-operative Bank as an exemplar.

So what has changed to stifle the SBDB even before it was born?

The Scottish government cited lack of borrowing powers as the cause for the U-turn, “but was unable”, writes Colin Donald, “to reconcile that explanation with an earlier pledge that the strategy which includes the SBDB "would apply … regardless of Scotland's constitutional future".

Given that the SNP has been so eloquent for years in the matter of powers it doesn’t have, that problem must surely have been obvious a year ago.

The claim that the funds for the bank would have to be sourced from capital markets also appears to contradict the prospectus laid out in the Scottish Government paper which suggests that the SBDB would predominantly draw down European funds.

The response of Colin Borland of the Federation of Small Businesses in Scotland, was scathing: “We were concerned that [the original announcement]  bore all the hallmarks of another bid to support the pet projects of the enterprise establishment, rather than get the necessary funds where they are most needed - the business base."

What is particularly galling about this tale is not that the bank that never was is never going to be, but that such a gulf persists between the grandiloquent government announcements of banking strategies, claims of “diverse” and “sustainable” banking, circulating across government and the quangocracy and the real business world.

The “enterprise establishment” sums up exactly the gap that continues to persist in business Scotland.

The gap is glaring in the tale of The Bank That Never Was.