A former deputy governor of the Bank of England yesterday warned there might be a “deposit flight” if Scotland votes Yes in today’s independence referendum.
Sir John Gieve, deputy governor for financial stability at the Bank between 2006 and 2009, told City A.M. that although he was not “expecting a Northern Rock-style run on the banks, there is the possibility of deposit flight, at least in the short term”.
He said that the “Bank needs to ensure that Scottish depositors will have ready access to their money in the event of heavy withdrawals”.
However, he was certain that it “will be working with the banks to make sure that cash is recycled within the UK … making sure the cash machines are full, and ensuring that banks’ internet systems work so you don’t get the sort of panic that developed with Northern Rock”.
The run on Northern Rock was made worse by the collapse of the bank’s website because of the number of people trying to move their money. This, in turn, caused panic and queues outside banks.
Gieve did “expect a mark down of the pound and the value of UK and Scottish companies”.
However, this should be short term because people will realise that the changes would not take place overnight but at some point in the future when negotiations have been completed. “After the initial reaction the main market problem will be uncertainty,” Gieve said.
He noted that during negotiations towards independence, “we will get a clearer idea of what is going to happen – but again, with the uncertainty, there will be a mark down in company values.
“As part of contingency plans, statements will have to be made to explain the timetable to independence and to point out that all the current regulations remain in place.”
Gieve said he would be “amazed if a Bank Holiday is called to prevent panic. As the results are coming in late, this would be difficult to organise.”