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When is a Scottish Bank not a Scottish Bank?

In 2008, Alex Salmond hailed RBS as the pride of the "Celtic Lion" economy that he envisaged for an

Is the Royal Bank of Scotland a Scottish bank? The answer, you might think, is in the question.

Technically, of course, RBS is a British bank, majority-owned by UK taxpayers, although the shareholding is kindly managed on our behalf by something called UK Financial Investments Ltd, which is, according to its founding mandate, run "at arm's length" from the Treasury.

In more buoyant economic times, however, when RBS was a private sector champion, it was a potential source of pride and financial clout for Scotland, should it decide to dissolve its union with England. (This was back when Scottish Nationalists looked westward to the dynamic performance of Ireland and considered whether there wasn't a "Celtic Lion" economy ready to be unleashed in imitation of the big cat over the sea. People don't talk so much about the Irish "Celtic Tiger" model these days.)

Channel 4's Faisal Islam published an interesting document on his blog last night showing how Alex Salmond cheered Fred Goodwin on in his takeover bid for ABN Amro - the a deal that ultimately broke the bank. As late as March 2008, Salmond was still selling Edinburgh's financial services buccaneers as evidence that Scotland could stand on its own as part of an "arc of prosperity" alongside Ireland, Iceland and the Nordic countries. The SNP leader told an audience in Harvard:

With RBS and HBOS - two of the world's largest banks - Scotland has global leaders today, tomorrow and for the long-term.

Or not, as it turned out. When RBS needed bailing out by the UK government, its balance sheet assets were equivalent to 2,500% of Scottish GDP. So the question naturally arises, how would an independent Scotland have coped? The SNP answer is to blame Westminster (naturally) and the Labour government for the regulatory failure that allowed the crisis to build in the first place. In that respect, I supposed he agrees with David Cameron.

Alistair Darling, the Chancellor who oversaw the bail out (and a Scot who will be playing a lead role in Labour's anti-independence campaign) has attacked Salmond today for being "slippery" on the issue of RBS exposure. Why should the SNP claim Scotland's oil revenues, Darling asks, but not its share of debt incurred to keep his former financial champion afloat? It is a decent question.

Meanwhile, RBS has announced 3,500 job losses as part of plans to shrink its investment banking operations. That is partly because the bits being scaled down weren't making enough money and partly in anticipation of restructuring to be enforced by the government over the next five years. Under proposals set out by the Vickers Commission on banking reform, high street and retail functions (the bits ordinary people use and trust) must be separated from investment functions (the dodgy casino bits everyone blames for impoverishing us all).

The Treasury had initially resisted the idea of enforcing separation too rigorously on the grounds that it would be a complex, time-consuming procedure that would necessarily delay the process of re-privatising UKFI's banking shares. George Osborne would have liked to sell a few tranches of RBS ahead of the next election to build up a war chest for a populist pre-polling day budget. That doesn't look too likely now. A source inside RBS tells me that this time last year, the bank was fully expecting to see some of its government shares floated in 2012, but the downturn in the economic outlook in the second half of 2011 killed that idea. Now everyone is resigned to the fact that HM Government is the boss for a long time to come.

Eventually, the reformed and restructured banks will be sold off. Then a whole new question arises. How much of the proceeds of that sale belongs to Scotland?