The Treasury is concerned an independent Scotland would not be able to replicate bodies such as the Financial Services Compensation Scheme, the Financial Ombudsman Service and the Money Advice Service.
The Treasury’s report on the impact of Scottish independence on the financial services sector says under European law Scotland would have to maintain its own compensation scheme.
The Treasury notes a financial compensation scheme in an independent Scotland would cover fewer firms and be dominated by Royal Bank of Scotland and Lloyds Banking Group. If one of those banks were to collapse, a Scottish scheme would struggle to compensate savers.
Although joint schemes are legally possible for organisations such as the FOS and MAS, the Treasury says there would be “significant difficulties” with shared arrangements.
Scottish customers would not automatically be able to obtain redress through the FOS if Scotland was to become independent, while separate redress schemes would mean different compensation arrangements depending on whether customers live in the UK or not.
If the MAS was shared between the UK and an independent Scotland, the Treasury argues it would push up the levy for firms both north and south of the border, or result in a reduced service.
Thameside Wealth director Tom Kean says: “The thinking around the FOS and the MAS is jumbled enough as it is without complicating it with separate systems for Scotland.”