Independent Scotland open to Cyprus-style bank risks, says Britain
"An independent Scotland would have a vastly oversized financial sector that would leave it vulnerable to a Cyprus-style banking crisis, Britain's finance ministry says.And from the Wall St. Journal:
"In an analysis paper, the third in a series the U.K. government is releasing ahead of the independence referendum, the treasury estimated that an independent Scotland would have banking assets worth more than 1,250% of Scottish gross domestic product.Wow. To us, that huge 1,250% number screams "tax haven" and, as our recent blogging on Cyprus reminds us, "captured state". We will have a whole lot more on that kind of vulnerability very soon.
The scale of Scotland's banking assets dwarfs those of Iceland and Cyprus, which had banking assets around 880% of GDP and 800% of GDP respectively. Both countries suffered severe financial problems due in part to the disproportionate size of their banking sectors.
"The experience of financial crises shows that countries with a large banking sector compared to the size of their GDP are significantly more vulnerable," the report says."
And as the example of Luxembourg shows us today, tax havens aren't the kinds of places that tend to be trustworthy when it comes to relying on them to step in when things get out of hand. More from the Reuters Scotland story:
"The Treasury report will say any future bank rescues would place a heavy burden on Scottish taxpayers, and could generate concerns about state finances that might discourage firms from basing their operations there."Now, from the UK Treasury, we can provide an update with more details, including the following:
- the total support provided to RBS in 2008 would have been the equivalent of 211 per cent of Scotland’s GDP.
- The Scottish banking sector would be extremely large in the event of independence. It currently stands at around 1254 per cent of Scotland’s GDP
- "Overall, the experience of financial crises shows that countries with a large banking sector compared to the size of their GDP are significantly more vulnerable."