Lloyds, RBS To Move South If Scots End Union

(Reuters) - Scottish-based Lloyds Banking Group and Royal Bank of Scotland will relocate to England if Scotland votes to end its 307-year union with the rest of the United Kingdom.

Bank of Scotland-owner Lloyds, which is 25 percent-owned by the British government, said on Wednesday its contingency plans for Scottish independence included setting up "new principle legal entities in England."

Separately, government and banking sources said rival Royal Bank of Scotland, 81-percent owned by the government, would also base itself in London in the event of independence.

Reuters reported last week that Lloyds was considering a move south in the event of a "yes" vote.

Lloyds and RBS, whose registered offices are in Edinburgh, had warned that Scottish independence would present a significant risk to their businesses, affecting their funding, tax and compliance costs.

Lloyds said it had responded to an increased level of enquiries from customers wanting to know about its plans following next Thursday's vote.

"While the scale of potential change is currently unclear, we have contingency plans in place which include the establishment of new principal legal entities in England," it said in a statement.

Reuters reported on Tuesday that Scottish banks were increasingly concerned about worried customers looking to move funds out of the region because of fears over the impact of independence.

Ratings agency Standard & Poor's has warned an independent Scotland would be unable to credibly support its banks if a new financial crisis struck. The country's three banks, including National Australia Bank's Clydesdale, have assets worth nearly 12-and-a-half times the size of its economic output.

The banks will have a period of at least 18 months after the vote to take whatever action they deem necessary while negotiations over the terms of Scotland's exit from the United Kingdom will take place.

"There will be a period between the Referendum and the implementation of separation, should a "yes" vote be successful, that we believe should be sufficient to take any necessary action," Lloyds said.

The banks had previously been reluctant to be drawn into the highly charged debate over Scottish independence for fear of alienating customers, but the move reflects the increasing chances that supporters for independence could win the vote with polls now showing the contest to be too close to call.

British Prime Minister David Cameron on Wednesday begged Scots not to rip apart the United Kingdom's "family of nations", flying to Scotland to man the barricades against a surge in support for independence eight days before a referendum.

"Lloyds' contingency plan to relocate to London in the event of a yes vote is understandable," said a spokesman for Britain's finance ministry.