Throughout the 2014 independence campaign Unionists promoted a false narrative and convinced many Scots to the view that a secure banking system in an independent Scotland required a central bank to act as a lender of last resort.

Bank of last resort

Scotland’s “no” vote for independence in 2014 brought an end to discussions about what an independent Scotland should do with its monetary institutions.

Throughout the 2014 independence campaign Unionists promoted a false narrative and convinced many Scots to the view that a secure banking system in an independent Scotland required a central bank to act as a lender of last resort. Their argument being that a bank was a necessary back-up not influenced by market forces thus able to provide stability in banking systems plagued by instabilities. But the Unionist reasoning was spurious with its acceptance that banking systems are inherently unstable and that to have a lender of “last resort,” meant having a central bank.

The truth of the matter was had Scotland voted for independence it could have unilaterally decided to keep using the UK pound (providing Scotland with greater flexibility than a bilateral agreement to change the currency if the British pound proved to be a bad choice).

In the case of such a unilateral choice, in principle, Scottish banks would not have been able to ask for support from the Bank of England as a lender of last resort.

But this did not mean that Scottish banks would have been short on lenders to go to since they had the financial markets of the entire world from which to find lenders willing to extend credit.