Komfie Manalo, Opalesque Asia: A 'yes’ vote to Scotland’s independence could translate to a BBB sovereign risk rating as there will be clear policy uncertainties for Scotland that would be detrimental to its sovereign rating, according to Director of Sovereign Risk Analysis Jan Randolph of IHS.
However, Randolph said the BBB sovereign risk rating would be temporary until the uncertainties are cleared.
"In general, a sovereign in the BBB range will face slightly higher borrowing costs than the UK’s higher sovereign rating and these slightly higher borrowing costs will cascade down to Scottish domiciled banks, corporates and individuals," he said. Randolph added, "However, it would also be in the UK’s own interest to manage any economic and monetary transition for Scotland in way that is least disruptive for both parties."
Randolph pointed to the general understanding that the Scottish sovereign rating would not be as strong as the UK’s at AA or 5/100 because of a number of important uncertainties and the lack of a payments track record, set against the somewhat smaller advantage of inheriting very little, if any debt.
Uncertainties to continue
These uncertainties would continue even after negotiations are over: (1) The nature of the Scottish currency; (2) how the UK’s sovereign balance sheet would be 'split’ in terms of assets (like foreign exchange reserves and Bank of England currency and...................... To view our full article Click here
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