Clause 203
Banking Bill
6:30 pm
Stewart Hosie (Spokesperson (Economy; Home Affairs; Treasury; Women); Dundee East, Scottish National Party)
The way in which the Bill treats Scottish and, indeed, Northern Irish banknotes constitutes a pragmatic approach. This may be the only time during this Parliament that I say these words, but I think that the Government have listened to the sector. I am pretty confident that by ensuring that banknotes can be backed by both interest-bearing and non-interest-bearing assets, we now have a platform that will secure the long-term future of the issuing of Scottish banknotes, while having the flexibility to ensure the integrity of the issue of all banknotes in the UK. In particular, the comments that the Minister made a short time ago about possibly having to act quickly in certain circumstances were absolutely right.
In a previous contribution, the Minister identified the fact that significant costs are associated with the printing, distribution and holding in security of Scottish notes. Those will need to be offset by the ability to earn interest on a reasonable proportion of the assets that are backing the notes in circulation. However, as drafted, the Bill remains silent on the precise mix of assets that the issuing banks will be allowed to hold. Striking the right balance between interest-bearing assets and non-interest-bearing assets will be critical to ensuring the future of banknote issuance in Scotland, and its profitability or its being economic at all. If future regulations are too restrictive on the level of interest-bearing assets that can be held against the notes, it could fatally undermine the ability of the issuing banks to continue to produce and issue the notes. Will the Minister therefore provide the Committee with an assurance that any future regulations on that matter will be drafted so as to ensure that the activity of issuing Scottish notes remains economic?
I know that there is general discussion of a 60/40 asset split. That will be finalised at some point and I hope the Minister can confirm that today. Will she also provide assurances that any such split will remain broadly as it is—at 60/40—and that there is no intention, certainly by her or by the Government, to use the regulations to change the balance between interest-bearing and non-interest-bearing assets backing the notes?