Alex Salmond hails Scottish banknote 'victory'

Scotland's banknotes were saved last night after the Treasury dropped controversial plans which threatened their existence.

The UK government planned to tighten the rules on banks' collateral which would have seen Scotland's banks lose the money they use to print and distribute their banknotes.

Under the current system which dates back to 1845, Scots banks deposit £4.7 billion in sterling with the central bank over a weekend to cover the cash they have in circulation.

The three-day deposit was seen as a gesture which guaranteed the notes' value.

Under the proposed rules they would have been required to lodge the £5 billion in sterling with the Bank of England all week.

Under the deal revealed last night, the banks will have to deposit 100 per cent of the value of their notes seven days a week, but they will get interest on 40 per cent of that.

First Minister Alex Salmond hailed the change as a "victory for Scotland's financial sector".

Mr Salmond, who had described the original plan as a "dagger at the heart" of Scottish banking said: "This is great news. It's a victory for Scotland and its financial sector.

"I'm delighted the Treasury have dropped their ludicrous proposals that threatened the very existence of Scottish bank notes. Let's hope they've finally learnt their lesson and never jeopardise our bank notes again.

"Although some concessions have been made, this is a substantial victory and, as such, we welcome it. All those who took part in the campaign deserve congratulations – their determination ensured success."