Reputation 'hurt by bank crisis'

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Scotland's reputation as a major financial centre has been damaged as a result of the credit crunch, the UK's leading banking body has said.

The warning from the British Bankers' Association came at the start of a Scottish Parliament inquiry into the financial crisis.

Holyrood's economy committee wants to find out if plans for economic recovery are up to scratch.

It will hear from several high-profile industry figures in the months ahead.

Although control over the financial industry lies with the Westminster parliament, the sector is a significant part of Scotland's economy - employing an estimated 90,000 people and making up about 7% of the economic output.

The reputation of the financial services marketplace and all financial centres, including Scotland, has undoubtedly been damaged British Bankers' Association

In a submission to the economy committee, the British Bankers' Association, which represents 220 banks, stated: "The reputation of the financial services marketplace and all financial centres, including Scotland, has undoubtedly been damaged.

"Our best way of responding is to provide leadership in the active regulatory dialogue taking place internationally and to achieve a fine balance between creating the right conditions for enhanced financial stability while maintaining the right conditions for open and competitive financial markets here and overseas."

However, Owen Kelly, chief executive of industry body Scottish Financial Enterprise, said the problems had to be looked at on a global scale.

"There is work to be done to rebuild the reputation of financial services and banking but that is an international task, not one confined to particular places or centres," said his organisation's submission to the committee.

Despite the concerns, both organisations argued Scotland still had a reputation as a desirable location for financial institutions.

The Building Society Association told the committee that, at a time of "significant distrust of plc and nationalised banks", mutual institutions were to be commended.

The UK government has stepped in to help see several Scottish-based financial institutions through the credit crunch - 70% of RBS is now owned by the taxpayer, while the Treasury agreed to take on about £1.6bn of debt under the deal which saw the Nationwide take over the collapsed Dunfermline Building Society.

Ministers also allowed the takeover of HBOS by Lloyds TSB to bypass normal competition rules.

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