One in the aye

RBS/Lloyds moving plans leave key questions opaque

Scotland's largest banks have moved to head off a crisis. Royal Bank of Scotland and Lloyds Banking Group say they will shift their Edinburgh-domiciled operations to London, should Scots vote for independence on September 18. That's a step towards financial stability - but not if you're a Scottish consumer.

By redomiciling south of the border, RBS and Lloyds would reduce the chances of a run on deposits in the case of a Yes vote. The risk that large parts of RBS and Lloyds-owned Bank of Scotland might lose the Bank of England as lender of last resort, and that their money might not be covered by the UK deposit guarantee scheme, could have led customers to shift funds to English banks. Now, they can have more confidence that their money is safe.

Thousands of Yes-supporting RBS employees are angry at the prospect of their once-proud bank leaving Scotland, according to a person familiar with the situation. They shouldn't be. The size of the banking sector an independent Scotland would have to bail out will shrink from its current 12 times GDP to around three times. That makes an independent Scottish economy more sustainable, by eliminating the potential cost of bank bailouts in case of further crises.

The downside is that the biggest Scottish banks would be run from abroad. If an independent Scotland is perceived to be a riskier place to do business, the BoE will - and should - require banks operating there to hold more capital. The banks themselves might decide to do less business there. At the very least, that could push up credit costs for Scottish consumers, and restrict credit availability.

How big a problem that is will ultimately depend on what currency Scotland uses. If Edinburgh uses pounds outside a currency union, it will need to run a budget surplus to generate the reserves needed to brace for market shocks - which will be harder without the financial services revenues of RBS and any others who decamp to London. If Scotland launches its own currency, and if that currency falls sharply against sterling, Scottish mortgage holders could see their interest costs soar.

Scottish voters deserve answers on how an independent Scotland would mitigate these serious risks. Don't bet on these materialising before September 18.