* Cable says independence would see bank make London switch
* Says greater stability of UK system would drive relocation
* RBS is central to debate over Scotland's future currency
* RBS says it is "politically neutral" over independence
By William James and Matt Scuffham
LONDON, Feb 5 Britain's Royal Bank of Scotland
would "inevitably" move its headquarters from Edinburgh
to London if Scotland votes for independence later this year,
Business Secretary Vince Cable said on Wednesday.
Scotland will hold a referendum in September on whether to
end its 307-year union with England, with polls showing around
42 percent planning to vote against independence and 29 percent
Cable said the greater stability offered by Britain's
established financial system and regulation would tempt the bank
to move its base to England.
"I think if you were managing RBS you would almost certainly
want to be in a domicile where your bank is protected against
the risk of collapse," Cable told a panel of lawmakers.
"I think they already have a substantial amount of their
management in London and I would have thought that inevitably
they would become a London bank."
Britain pumped 45 billion pounds ($73 billion) into RBS to
keep it afloat during the 2008 financial crisis, leaving
taxpayers with an 81 percent shareholding in what was briefly
the world's biggest bank following a huge expansion led by its
former chief executive Fred Goodwin.
Since its rescue, RBS been embroiled in scandals ranging
from the mis-selling of U.S. home loans to the attempted rigging
of benchmark interest rates.
It is not expected to return to private hands for another
three to five years, according to banking industry and political
sources, raising further question marks over whether it could
remain domiciled in Scotland.
The bank employs 12,000 staff north of the border and is
still headquartered in Gogarburn, to the west of Scottish
capital Edinburgh, where around 3,200 staff are located in a
complex featuring shops and restaurants that became a symbol of
Although its senior managers have been based in London since
the bailout, previous chief executive Stephen Hester had spoken
of strong emotional ties between the bank and Scotland.
RBS declined to comment on whether a vote for independence
would lead it to leave Edinburgh and said it was "politically
neutral" on the issue of independence.
"We don't support political parties or political movements.
We will respond to what voters decide and governments agree," it
said in a statement on Wednesday.
Cable's remarks put RBS at the centre of the political
debate between London and the Edinburgh over how independence
would work - much of which is focused on finance and currency.
How the bank would handle a possible split is one of many
unanswered questions concerning Scotland's well-developed
financial sector, which accounts for around 7 percent of its
economic output and directly employs almost 85,000 people.
Scottish nationalists are basing their economic plans on
keeping the pound by creating a currency union, but Britain sees
that as a highly unlikely outcome.
The British government has said there is no clear economic
rationale for a currency union and warned that such an
arrangement could create financial problems similar to those
suffered by the euro zone.
Last week, Bank of England Governor Mark Carney said an
independent Scotland that keeps the pound would have to give up
some national sovereignty to create a banking union to protect
against a financial collapse.
Cable echoed those concerns on Wednesday, highlighting the
importance of RBS to the debate over whether a currency union
would be feasible because of its sheer size relative to the
Scotland's GDP is estimated at around 130 billion pounds
($212 billion) while at the end of September RBS had assets of
1.1 trillion pounds.
"That, almost by definition, creates a high level of
potential instability which that currency union would have to
address," Cable said.
He said that after taking into account the implications of a
banking union, he thought it would be in Scotland's own
interests to create a new currency.
"The problems of a currency union with an independent
Scotland are so difficult... that it would almost certainly
prove to be in Scotland's interests, and indeed the rest of the
UK, that Scotland did have its own currency," he said.
On Tuesday BP, Britain's second biggest oil company,
warned against Scotland voting for independence, saying it would
create uncertainty over Scotland's future currency and mean