The financial services industry has played a huge part in the fabric and prosperity of Scotland for hundreds of years and continues to do so.&nbsp; It is one of the country&rsquo;s biggest industries, a global financial services centre and second only to London in the UK as a financial centre.&nbsp; The main differences between London and Scotland are that London is home to many major exchanges and trading floors, with all their associated support functions. But the relationship between London and Scotland is complementary &ndash; being in the same jurisdiction as the largest financial centre in the world, London, is a big competitive advantage for Scotland. <span class="gras"></span> <p class="intertitre1"> <span class="gras">A long history</span> Scotland has a very long history in providing financial services. Banking in particular goes back many years, with some major milestones in the development of modern banking being passed in Scotland, including the invention of the first double-sided banknote, the creation of the overdraft and the Personal Identification Number (PIN) technology behind automated banking. Three of Scotland&rsquo;s banks have been permitted to issue banknotes since as far back as 1695. In 1875 the Chartered Institute of Bankers in Scotland was founded as a professional and educational body, making it the world's oldest professional body for practising bankers.&nbsp; Scotland is also home to the oldest professional accounting body in the world with The Institute of Chartered Accountants of Scotland (ICAS) being created in 1854.&nbsp; The insurance sector dates back to the early 1700s when the increase in international trade led to a requirement for marine insurance for many Scottish import and export companies and life insurance was invented by two Scottish clergymen, Wallace and Webster, in 1748 with the Scottish Ministers Widows Fund. Their legacy continues today not only in the multi-billion dollar international life insurance industry but also in Scottish Widows, the pension and savings company that can trace its origins back to Wallace and Webster. Scotland also played a central role in the development of investment funds, finding new ways in the 1870s and 1880s to enable small investors, acting collectively, to participate in the growth of what were then the &lsquo;emerging markets&rsquo; of their time, especially in the westward expansion of the United States. Scottish lawyers and professional advisers were in a strong position to advise their clients on the new investment trust vehicles and the early investment trust industry was concentrated in Scotland. Companies like Alliance Trust and the Scottish Mortgage Investment Trust continue this tradition today, as do their counterparts in Scotland&rsquo;s professional services companies. Indeed, a successful professional services sector is essential to all modern financial centres and Scotland is home to a wide range of providers, including the &lsquo;Big Four&rsquo;, as well as more specialist advisers. <p class="intertitre1"> <span class="gras">A strong and diverse financial services industry</span> From this historical background, a strong and diverse financial services industry has grown in Scotland with particular strengths in fund management, banking, insurance, pensions and more recently asset servicing.&nbsp; The growth of the industry over recent years is attributable to a combination of new and expanding domestic institutions and investors from overseas, attracted by: a highly skilled workforce with good links to leading universities; the UK&rsquo;s regulatory environment; being part of the same jurisdiction as London (one of the world&rsquo;s largest financial centres) and access to the wider financial markets of the rest of Europe. Financial services is one of the biggest industries in Scotland, from a total population of around 5 million, financial services employ around 100,000 people directly and about the same again indirectly. It contributes around &pound;7 billion to the Scottish economy and the fund management industry in Scotland is estimated to be currently managing over &pound;800 billion of funds. All aspects of investing, from the accumulation of capital to the decision to invest, to the management of a portfolio to the safe and guaranteed execution of an international transaction, are handled in Scotland. A focus on investing, particularly with a long-term perspective, is arguably Scotland&rsquo;s most internationally recognisable feature. The concentration of investment decision makers that arises from a combination of pensions, asset management and wealth management expertise is a key feature of the Scottish industry, particularly in Edinburgh. For companies looking to raise money from investors, Edinburgh is usually on their list of European financial centres to visit, since companies like Baillie Gifford, Aberdeen Asset Management, Standard Life Investments, Kames Capital and Artemis are managing funds on behalf of an international client base. Moreover, they are investing internationally, giving clients a global outlook and influencing economies and markets around the world. This creates an intellectual climate for investing that draws heavily on Scottish tradition: while all types of investments are managed in Scotland, the culture is certainly founded on a long-term approach, especially as far as equities are concerned. <span class="gras"></span> <p class="intertitre1"> <span class="gras">The development of asset servicing&hellip;</span> In recent years, we have seen particular growth in the closely-related discipline of&nbsp; asset servicing. Asset servicing, which includes custody, investment administration, fund accounting and other aspects of managing and overseeing the investment process, is an increasingly busy sector of Scotland&rsquo;s banking industry. Many of the global banks offering these services have operations in Scotland, including Blackrock, Citi, JP Morgan, Morgan Stanley, BNP Paribas, State Street, BNY Mellon, HSBC and Barclays. &lsquo;Asset servicing&rsquo; is not an easily understood term outside the financial services industry and the function rarely sits at the forefront of a bank&rsquo;s promotional story to the world at large. This may be because, by definition, the customer is always another company rather than an individual. This is not a retail business. But the people who work in it are operating in several languages, across time zones, to immoveable deadlines and with a lot at stake. It is a highly professionalized sector of the industry and, while it thrives across the UK, Scotland is the main centre for such activities. It is arguable that asset servicing has really only become an identifiable outsourced branch of investment banking in recent years.&nbsp; Before that, there simply wasn&rsquo;t the same number, range and complexity of services required in processing financial assets to warrant a sector of its own.&nbsp; But the growth in the industry, its internationalism and its speed of transactions has changed that. This range and complexity has led to the creation of almost a whole industry in itself &ndash; employing people in different kinds of jobs at different levels and attracting those who have just graduated to those with a number of years of experience.&nbsp; The international nature of the work attracts considerable movement around the world and visiting any asset servicing operation in Scotland, one of the things which is striking is the range of nationalities working there at any given time. And a sizeable part of the customer base for these operations comes from asset management. So, Scotland can accurately be described as an &lsquo;end to end&rsquo; provider of investment services, from top-level strategic advice to sovereign wealth funds and other large sources of capital to the management, securely and in compliance with the highest international regulatory standards, of complex transactions. <p class="intertitre1"> <span class="gras">&hellip;and green finance</span> That cultural tradition of long-term investment is perhaps best exemplified in the activities of the Green Investment Bank (GIB). The GIB was established in Edinburgh in 2012 by the UK government in order to accelerate the UK&rsquo;s transition to a greener, stronger economy. The Bank backs green projects, on commercial terms, across the UK, and mobilises other private sector capital into the UK&rsquo;s green economy. The Bank was the first of its kind in the world and contributes greatly to Edinburgh&rsquo;s position as an international centre of excellence in green investment. It also benefits from a stable and secure pool of talent and the international connections offered by a city like Edinburgh. <p class="intertitre1"> <span class="gras">Future challenges</span> There are of course still challenges facing the industry, such as the implementation of new regulation at both UK and EU level and addressing some of the legacies of the financial crisis, but the industry in Scotland thrives in a competitive environment and has its strength rooted in its diversity. Most of the companies that have established operations in Scotland in recent years will point to the availability of skilled workers as a major attraction. However, as the industry experiences rapid change driven by technological advances, maintaining this skills base will be a challenge. At the research level, the Scottish Financial Risk Academy (SFRA) has moved quickly to tackle this challenge. The SFRA is a collaboration between the industry and Scottish universities, set up in the wake of the 2008 financial crisis, to address the evident shortcomings in the industry&rsquo;s ability to assess and manage risk. It is supported by some of the biggest names in the industry and is based at Heriot Watt University in Edinburgh. It creates a forum for dialogue between industry practitioners, regulators and leading academics relating, on all aspects of financial risk. Some of the most far-reaching changes that the industry faces stem from the advent of &lsquo;Big Data&rsquo; and the powerful analytical tools that flow from it. These changes present questions not only in relation to skills, though the issues for skills provision are potentially considerable. But in the financial services community in Scotland, much is already being done to embrace these changes as an opportunity, rather than a threat; and capitalise on the growing market opportunity in data science. Our industry in Scotland has a long history in championing innovation and today we have the very best academic institutions leading the way in these technologies with excellent links to our industry, the opportunities are there to work together and shape the future of the industry to deliver the best for our customers.