Financial stability and depositor protection make for Scots law changes

Robert Goddard of Aston University draws our attention to a couple of proposals relating to Scotland in the consultation paper issued on 1 July 2008 by the Tripartite Authorities with regard to financial stability and depositor protection. 

The proposals are  as follows:

"1.69 In line with its priority to provide protection to noteholders, the Government intends to legislate to strengthen the arrangements underpinning banknote issuance by commercial banks in Scotland and Northern Ireland. It proposes that commercial banks issuing banknotes will be required to hold assets (Bank of England banknotes and UK coin, and funds in interest-bearing accounts at the Bank of England) to the full value of their notes at all times, and ring-fenced for the benefit of noteholders.

1.70 The Government also intends to bring the law in Scotland relating to the treatment of cheques into line with that in the rest of the UK, by abolishing the funds attached rule in Scots law so far as it relates to cheques, and making any necessary consequential changes to related legislation."

With regard to the latter, Scots Law News recalls a controversy in the 1980s because the "funds attached" rule meant that countermanding a cheque did not prevent the money going out of your account, albeit it went to a suspense account rather than the payee's.  But that seemed to be sorted out, albeit in rather technical and opaque fashion, by section 11 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 which inserted section 75A into the Bills of Exchange Act 1882.  Perhaps that wasn't enough.  Anyway, who pays by cheque nowadays?

By the way, the Tripartite Authorities are the Bank of England, HM Treasury and the Financial Services Authority, all well-known as sturdy upholders of the independence of Scots law.