As the Scotish independence vote draws near and remains too close to call, some analysts are suggesting Plan B for Scotland may be to choose to opportunistically default. This has done nothing to calm concerns of the aftermath of a "yes" vote - despite US asset managers proclaiming it irrelevant. Nowhere is that more clear than, as The Independent reports, Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday's independence referendum, it has emerged. Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, but the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote.
Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday's independence referendum, it has emerged.
Sources told The Independent the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote. There have been some suggestions that people will want to move their money to English banks in the event of an independence vote.
Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, stressing that there was no need because the Bank of England has pledged to stand behind all accounts for at least 18 months in the event of a “yes” vote.
However, concerns about how safe is their cash still linger.
Sources at major banks said they had been issuing clear instructions to their Scottish branches to reassure customers there was no reason to panic.
One said: “We have seen a big rise in customers coming in and asking us what would happen, but there is no sign of any significant flow of deposits from north to south.”
Figures from the Bank of England show the number of notes in circulation has been creeping up steadily over the last year. This month there are 62.3 billion notes in the country, compared with 59.8 billion a year ago.
A source at one bank said: “This forms part of our contingency planning. We are, of course, monitoring the situation very closely from hour to hour.”
* * *
As Bloomberg reports, Salmond May Favor Opportunistic Default
Adopting sterling informally while reneging on debt might be Scottish govt’s plan B, Angus Armstrong, director of macroeconomics at Niesr, says in statement, citing comments from Scottish First Minister Salmond.
If Scotland refused to accept fair share of existing U.K. debt, it might be interpreted as a default, even if technically it wouldn’t be failure to pay
If Scotland were to not pay its share of debt, junk status is probable; it’s unlikely to be excluded from markets for the avg time of ~10 years, but there’s “no free lunch” from opportunistic default
Biggest hurdle for any Scottish bid for EU entry would be obtaining Germany’s “yes”
If Scotland sets precedent for EU membership after secession, despite debt repudiation, Germany would be exposed to other post-secession insolvencies
If Scottish govt chose to combine “sterlingisation” with reneging on fair share of existing U.K. debt, it would boost fragility of exchange-rate arrangement; Niesr economists expect currency arrangement would fail and Scotland forced to introduce its own new currency within 1 year.
* * *
Yet, American investors should not worry for some talking-head yesterday on CNBC proclaimed Scotland irrelevant (maybe he should tell the $30 billion in outflows that)...