BoE would have supplied extra notes, liquidity if Scotland voted 'yes'

The Bank of England (BoE) would have supplied additional bank notes and pumped extra liquidity into banks if the Scottish referendum had resulted in a break-up of the United Kingdom.

Minutes from a 26 September meeting of the BoE's Financial Policy Committee (FPC) revealed the central bank's contingency plans in the event of the pro-independence campaign coming out on top.

A routine indexed long-term repo (ILTR) operation had been scheduled for 7 October, but the BoE said it was "ready and able" to announce extra operations at very short notice.

"It was subsequently decided by the Bank that, in the event of a ‘yes’ vote, and as a precautionary measure to backstop sterling money market liquidity, the Bank would immediately announce its intention to conduct additional operations in each of the two succeeding weeks, bridging to the already scheduled 7 October operation," the FPC minutes showed.

The BoE had also made arrangement to meet the potential increased demand for bank notes from holders of Scottish notes, it added.

Meanwhile, given that the government had ruled out a formal currency union with a hypothetical independent Scotland, it was possible, the BoE said, that expected "currency mismatches" could have prompted investors and financial companies to reduce their exposures to Scottish assets.

There would have also been "significant effects" on UK banks and insurers domiciled in Scotland in the event of a 'yes' vote. Furthermore, redomiciling to England "would not mitigate all risks to financial stability", it said.