The Economist magazine on the (previously noted here) current Westminster threat to Scotland’s and Northern Ireland’s private banknotes:

There are some £2.9 billion-worth of Scottish banknotes in circulation and £1.5 billion of Northern Irish. Issuing banks are currently required to deposit assets equalling about 95% of their notes with the central bank—but only from Friday to Sunday. The rest of the week the deposits are off earning interest elsewhere, and there is no financial backing for Scottish and Ulster banknotes. If an issuing bank went belly-up then, its notes would be so much lavatory paper.

The last two sentences amount to taking at face value the Chancellor of the Exchequer’s rubbish press releases. In fact, from Friday to Sunday, the Scottish and Ulster banknotes are fully backed by very safe non-earning assets (required holdings of Bank of England liabilities). The rest of the week they are fully backed by very safe earning assets. If an issuing bank went belly-up, which is equally unlikely on any day of the week, noteholders would have the same priority in claiming repayment out of the bank’s assets, no matter which day of the week it was.