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Why a separate bank regime for Scotland?

Gavin Brown MSP says small and medium sized businesses need to see bank lending increased to help boost recovery. And, as we see below, FSB Scotland has a clear view on what banking reform needs to cover- and what it should avoid…

But how many new sets of banking rules and regulators do we need?

The UK government is working on a set of banking reforms. So is the European Union. Do we need additional banking regulation on top of these in an independent Scotland?

This would seem to be the key recommendation in the Scottish government’s new banking strategy released last week. The relevant passage is contained under the “Purpose” section reads:

“It is the Scottish Government's view that the principles and approach to banking set out in this strategy should apply to Scotland's approach to banking regardless of Scotland's constitutional future. However, we believe that independence would allow Scotland access to the necessary levers to encourage a responsible, sustainable banking sector that better meet the needs of the Scottish people, that enhances Scotland's competitive advantage and that better enables us to address the economic challenges facing us.”

Says Scottish Conservative finance spokesman Gavin Brown, “The SNP Government claims it wants to help banks recover, yet this document suggests that if the Nationalists succeed in breaking up Britain they intend to introduce the one thing the banks fear most – a different regulatory regime on this side of the border.

“All banks operating across the UK benefit from working with one set of rules but under independence they would be forced to comply with two. This would bring unnecessary complications and costs to their businesses, costs which would ultimately have to be borne by their customers.

“If the Scottish Government is serious about helping Scotland’s financial services sector, it should pledge to maintain the same regulatory regime as the rest of the UK.

“But the SNP wants a different banking system for the sake of it and seems to ignore the very real risks that would fall upon banks, business and the people of Scotland.”

Separately, the Federation of Small Businesses made clear what the SME sector needs from our banks. Colin Borland, the FSB’s head of external affairs in Scotland said, “If we want to accelerate economic growth in Scotland, we need to ensure that our small business can access flexible, affordable finance.

“We welcome the Government’s proposals to expand the Scottish Investment Bank into a Scottish Business Development Bank, introducing much needed competition into the business finance marketplace. Aligning our enterprise support networks with this new institution also seems like a sensible idea – but we must not have another system which creams off whatever is new and trendy without supporting the business base. 

“Scotland’s financial services industry, including banking, is hugely important in many of our communities.

“However, bridges still need to be built between the big banks and small businesses. Developing real finance options for Scottish small businesses must be a priority for both the UK and Scottish Governments.”

Gavin Brown is Conservative MSP for the Lothian region