LONDON (Reuters) - An independent Scotland would rely on the Bank of England to support its banks if they ran into trouble, the country's separatist leader said on Tuesday, raising questions over the nature of his proposed split with Britain.
"The lender of last resort would still be the Bank of England," Scottish First Minister Alex Salmond told an evening audience in London, answering a question over who would be the ultimate backer of distressed Scottish banks.
Salmond's governing Scottish National Party says Scotland would retain the British pound after its hoped-for separation from London, but has given little detail on the monetary structure it would put in place.
"Our policy is to use sterling until such time as people in Scotland decide otherwise," Salmond said, adding that a currency union between Scotland and England could be run along the lines of the former monetary union between Belgium and Luxembourg.
The British government, which opposes the breakup of the 300-year-old union with Scotland, has previously indicated that the Bank of England's support would not be available if an independent Edinburgh needed financial help, even if it retained the use of sterling.
The issue remains a live topic after British taxpayers stumped up hundreds of billions of pounds in cash and state guarantees to save Royal Bank of Scotland and HBOS, another Scottish lender, from collapse in the banking crisis.
Treasury Minister Danny Alexander has said an independent Scotland would struggle to repeat that scale of rescue.
Salmond said a currency union with the rest of Britain would mean the central bank in London continuing to set interest rates for the 5.2 million people of Scotland after separation.
But this would not cause problems because of similarities in the economies north and south of the border, he said.
"Monetary policy would still be set by the Bank of England as it is at the present moment. Because there is no great divergence in terms of the productivity of the Scottish and English economy I don't regard that as a huge difficulty," he said.
"What independence would give us is substantial discretion over fiscal policy," he added, saying that gaining full power over raising and spending taxes would be beneficial to Scotland.
On Wednesday Salmond will publish his proposals for a referendum on independence he wants held in 2014.
(Reporting by Tim Castle; Editing by Gary Hill)