Independent Scotland bank crisis fears

An independent Scotland would have a vastly oversized financial sector that would leave it vulnerable to a Cyprus-style banking crisis, Britain’s finance ministry says.

Before a referendum due in Sept 2014 on whether Scotland should split from the United Kingdom, the British government is analysing the impact of independence on Scotland, which has a population of about five million.

A report from the finance ministry — or treasury — says that without the British government’s regulatory framework, Scotland would be left vulnerable by having a banking sector that dwarfs its economy, driving businesses out of the country.