Salmond voices bank notes fears

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First Minister Alex Salmond has voiced fears Scottish banks may stop issuing their own notes if financial measures proposed by the chancellor go ahead.

Alistair Darling is consulting on measures aimed at improving financial stability and protecting depositors.

They would require banks to lodge funds with the Bank of England to cover the value of their notes seven days a week.

Mr Salmond said the move would "remove any advantage" in issuing notes from Scottish and Northern Irish banks.

They currently issue £100m in notes per year.

Mr Salmond said the proposals were a "dagger at the heart of Scottish bank notes".

'Smash and grab'

In Scotland, three banks are allowed to issue their own notes, Clydesdale Bank, Royal Bank of Scotland and Bank of Scotland - which was the first Scottish bank to issue notes back in 1695.

Under current laws the banks have to lodge funds with the Bank of England to cover the value of their notes for three days of the week.

If this were to go ahead it would force us to consider whether issuing banknotes would be viable in the future Clydesdale Bank spokesman

The other four it can be invested elsewhere.

New proposals would require funds to be lodged with the Bank of England for the entire week.

Mr Salmond claimed the changes were "the greatest threat" to Scottish notes since 1845 - the year the Banknotes Scotland Act regulating the issuing of the notes was brought in.

The first minister said: "This would remove any advantage from issuing notes, therefore I am certain one or more of the banks would stop the note issue.

"Under the cover of a consultation on financial stability, the Treasury are launching a smash and grab at the Scottish note issue.

"What makes this a particularly underhand and shabby attempt is to cloak it in a document about financial stability.

"The Scottish banks are among the most stable financial institutions in the world."

Same protection

He pledged the Scottish Government would respond to the consultation in "the strongest terms".

A spokesman for Clydesdale Bank said it was "very concerned" about the potential impact of the proposals and was seeking a meeting with the Treasury.

He said: "If this were to go ahead it would force us to consider whether issuing banknotes would be viable in the future, a position we do not want to be forced into."

A Treasury spokesman said that if the changes in the consultation were not made, customers of Scottish banks would not have the same protection as customers of English banks.

He added: "The changes... will leave all British banks and their customers on a level playing field.

"The consultation proposes changes which will reduce the likelihood of individual banks facing difficulties, reduce the impact if, nevertheless, a bank gets into difficulties and also provide effective compensation arrangements in which consumers have confidence."