Records of the Bank of Scotland 1695 2001

A new report from the Adam Smith Institute, “Quids In: How sterlingization and free banking could help Scotland flourish”, was featured in The Herald and The Scotsman.

The report argues that an independent Scotland could have a more stable economy than the rest of the UK if adopted a policy of, what it calls, ‘adaptive sterlingization’, which combines unilateral use of the pound with financial reforms to remove government protection of established banks.

From The Herald:

Using the pound without a currency union and reforming Scottish banking regulations could help an independent Scotland flourish, according to the right-wing free market think tank, the Adam Smith Institute.

Financial experts and UK politicians have warned that so-called sterlingisation would leave the Scottish economy adrift without the support of a central bank with fears raised of banks relocating south of the border and even capital flight away from Scotland.

But the Institute argues that “Britain’s obstinacy could be Scotland’s opportunity to return to a freer, more stable banking system”; that “adaptive sterlingisation” would be a positive boon for a newly-independent Scotland as it would create a more stable financial system and economy and reduce risk-taking within the banking sector.

Read The Herald article here.

From The Scotsman:

A report, published today by the Adam Smith Institute, claims that a particular form of “sterlingisation” could also be more effective than Alex Salmond’s Plan A for a formal currency union.

The institute recommends a currency arrangement described as “adaptive sterlingisation”, which would see an independent Scotland adopt a policy of unilateral use of the pound outside a currency union, combined with reform of Scottish banking.

The paper argues that such an approach would cut risk-taking and increase competition in banking, significantly reducing the prospect of large-scale bank panics and financial crises.

Read The Scotsman article here.

The report, “Quids In: How sterlingization and free banking could help Scotland flourish”, can be read and downloaded for free here.