The report states that Scotland would need to set up its own financial services regulator and equivalents of the Financial Services Compensation Scheme and Pension Protection Fund - and ensure they were adequately funded.
Due to the “cost efficiencies” of the current bodies being UK regulated, fees and levies to fund equivalents in an independent Scotland could rise significantly, increasing the cost burden on firms.
The report explains that in general independent Scotland would have “significant difficulties” providing protection to match its UK counterparts, due to the smaller number of firms and the disproportionate size of the sector in relation to the country’s GDP.
In particular, the report warns that the retail bank deposit market would be dominated by only two large banks, Royal Bank of Scotland and Bank of Scotland, and if one were to fail the costs of compensating its depositors would fall almost entirely on the remaining bank.
A Scottish FSCS would also be required to cover deposits amounting to more than the entire region’s GDP, the report adds.
It says: “The consumer protection bodies... are funded through levies on one of the largest and most diverse financial services industries in Europe. They are large, well-resourced organisations that cover the whole financial services industry, UK-wide.
“The existing system is therefore relatively cost effective. If Scotland were to become independent, it would need to make a number of decisions about what structures to put in place to provide consumer protection.
“In some cases it might wish to duplicate the UK’s arrangements or establish equivalent bodies. In other cases, it might wish to put in more limited or more extensive provisions.
“For an independent Scotland and the continuing UK to set up duplicate or parallel bodies would be less efficient and cost effective overall than the current position in which there is a single set of bodies serving all consumers.
“In other words, should Scotland become independent, it would be more expensive to achieve a level of consumer protection equivalent to that which currently exists.”