RBS mulling options should Scots vote for independence

Thursday 26 June 2014 09.03
Scottish independence vote being closely watched by Royal Bank of Scotland
Scottish independence vote being closely watched by Royal Bank of Scotland

Royal Bank of Scotland is consulting with lawmakers and considering its options should Scotland vote for independence in September, Chairman Philip Hampton told shareholders at its annual meeting yesterday. 

The chairman said the impending vote had created a great deal of uncertainty and would have implications for the bank's credit rating, taxes and regulation. 

"We are having to consider the possible business implications of a 'Yes' vote and our response. We maintain a continuous dialogue with the Bank of England, the UK government and the Scottish government on these matters," he said. 

Scotland will hold a referendum to decide whether to end its 307-year union with England on September 18.

The latest YouGov poll showed that the "No" campaign had extended its lead over the pro-independence "Yes" campaign to 17 points, bucking a recent trend of surveys that have shown rising support for the nationalists in recent months. 

The future of RBS, which employs 12,000 in Scotland where the financial services industry accounts for 7% of economic output, has become a key part of the independence debate. 

UK Business Secretary Vince Cable has said it is inevitable RBS, which received a £45 billion government bailout during the 2008 financial crisis, will move its headquarters from Edinburgh to London in the event of independence because of the greater stability offered by Britain's established financial system and regulation. 

"We're looking at what could happen and how we can maintain a stable bank," Cable said. 

Scotland's First Minister Alex Salmond hopes Scotland will officially become independent in March 2016, giving Scottish based banks RBS and Lloyds Banking Group 18 months to assess their options. 

Scottish nationalists are basing their economic plans on keeping the pound by creating a currency union, but Britain sees that as a highly unlikely outcome. 

The British government has said there is no clear economic rationale for a currency union and warned that such an arrangement could create financial problems similar to those suffered by the euro zone. 

Hampton told RBS shareholders that the Bank of England would continue to be the lender of last resort for the bank during the period of transition. 

He also told the meeting it was inevitable the bank would close more branches following a 30% decline in branch transactions over the past three years and a 230% rise in online and mobile transactions. RSB owns Ulster Bank here. 

Hampton said, there was no floor, or minimum number, set for the number of branches which RBS needed to keep. 

"The branch network is just becoming too expensive. It will match the customer requirements. If customers are not going into branches we will have to review why they are there," he told Reuters after the meeting. 

RBS, which currently has about 1,900 branches, said in April that it would close 44 branches and is also selling more than 300 branches as a condition of receiving state aid during the 2008 financial crisis. 

The bank's chief executive Ross McEwan told Reuters after the meeting that the industry needed to redefine the role of the branch. 

Meanwhile, shareholders owning 99.8% of the shares, including UK Financial Investments, which manages the government's 81% stake, voted in favour of the bank's pay policies at the AGM.