An independent Scotland would struggle to contain volatility in its banking sector ratings agency S&P has warned, and would risk an Icelandic-style loss of confidence in any significant crisis.
Scottish banks would manage assets worth more than 10 times GDP if the country chose to break with the rest of the UK, it said – even higher than Iceland’s at the peak pre-crisis, it said
‘There are important considerations and uncertainties relevant to our view of the creditworthiness of banks domiciled in an independent Scotland,’ said S&P analyst Giles Edwards.
‘[These include] the ability and willingness of the Scottish government to provide extraordinary support to systemically important banks under stress. The willingness and ability of a future Scottish government to support its banking system appears challenging to us at this point.’
Across the UK as a whole, bank assets stand at 4.9 times GDP. Iceland in 2008 had a banking sector balance sheet of 8.8 times.
The leaders of all Britain’s biggest political parties have insisted an independent Scotland would not be able to call on the support of the UK treasury or the Bank of England (BoE).
Pro-independence campaigners insist it would be possible to draw up an agreement with the BoE to continue to operate as the lender of last resort, as part of a wider currency-sharing deal.