4 thoughts on “Can Scotland extract itself from the Bank of England?”

  1. Posted 23/04/2013 at 16:07 | Permalink

    Mmmm… Most thought provoking but it raises a lot of questions in my mind. In the likely scenario that Scotland is served by English-domiciled banks, why would the BoE have to bail out a bank operating primarily in Scotland? More widely, why do they need to bail out any bank? Also, a Scotland without their own currency would not have access to QE and would have to be much more disciplined not to run up a big debt.

  2. Posted 23/04/2013 at 20:55 | Permalink

    @Ian – I agree with the last point (though if England decided to go for QE and Scotland was already booming for some reason, Scotland would have to put up with English inflation!). BoE can, in principle, provide lolr functions to whomsoever it wants. I agree it raises the question of whether it should do so at all (though, technically, proponents of traditional central banking would argue that lolr is not “bailing out”). I don’t think that the BoE could or would treat a bank differently because it was operating mainly in Scotland if it was domiciled in England. After all, all the Scottish domiciled banks have major operations in England to in any case.

  3. Posted 24/04/2013 at 11:00 | Permalink

    Maybe if the BoE becomes lolr for a currency union with Scotland it should first define bail-in conditions for creditors and depositors as the ECB is proposing for Cyprus. This would operate for all banks and thus remove the moral hazard for English banks too.

  4. Posted 24/04/2013 at 12:31 | Permalink

    yes, that would be sensible

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