Scotland decides today whether the country should be independent from the UK. In the event of a ‘Yes’ vote, the political, economic and social upheaval will be significant.We don’t know what currency a newly independent Scotland will use, but no matter the outcome we can already speculate on a few areas.For example, Scotland would have to join SWIFT, the provider of secure financial messaging services, so that its banks could use the network. At the moment Scottish banks are able to do this via the UK’s membership, but once Scotland becomes a sovereign country, the present arrangements will no longer apply. Similarly, with credit cards, it is likely that every cardholder in Scotland will need to be issued with a new card and PIN. Card networks such as MasterCard and Visa already work across multiple jurisdictions so this process should be simple, with just one-off costs incurred in terms of money and time. Another area to consider is the trading, clearing and settlement of securities. Plans in place are not yet known but I would expect, as an independent country, there will be a desire for Scotland to have its own stock exchange and listed securities for Scottish companies. Nowadays it is possible to buy an ‘exchange in a box’ and so establishing a national market on which companies can list and be traded is certainly possible but again, it will not be cheap.At the moment all UK securities are cleared and settled through Crest, the UK’s central securities depository (CSD). It is likely that this will continue as there is already a precedent for a ‘foreign’ country to do this as Crest currently handles Irish securities. However if Scotland wants to be part of T2S, in time it may need to establish its own CSD. One area that is likely to be highly complex is payments. Maintaining an efficient and reliable payments system is critically important to any financial system.Presently Bacs is responsible for the clearing and settlement of the UK’s automated payments such as credit transfers and direct debits, and the technical infrastructure that sits behind this is provided by Vocalink. As these organisations have been established to support UK payments, it seems highly unlikely they can provide the same services to a country that is no longer part of the Union. The question is: could Scotland consider itself to be truly independent if it was using another country’s payments system? This is a fundamental issue that will need to be addressed as soon as Scotland’s constitutional future is known.My view? An equivalent system to that which exists in the UK would need to be established – one that incorporates a clearing house for the management of credit transfers and direct debits, as well as a network for ATMs.Resilient infrastructure must be built, which is supported by an appropriate network and systems. While the technology can be bought, it would be expensive, with costs likely to be borne by Scotland’s Government or banks.A massive amount of uncertainty persists, but we can be sure that a ‘Yes’ vote this week will have a profound impact on Scotland’s financial system. Certain changes needing to be implemented are straightforward, involving relatively little cost and time, but others are reasonably complex. What’s certain is that they all need to be identified, understood, prioritised and properly planned for.
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