UPDATE 1-Bank of England had cash ready in case Scotland chose independence

* BoE was ready to pump in liquidity if Scotland voted 'yes'

* Extra banknotes ready in case of rush of withdrawals

* FPC sets date to decide new bank leverage ratio

* BoE mulls higher countercyclical capital requirements (Adds detail)

By David Milliken and Steve Slater

LONDON, Oct 10 (Reuters) - The Bank of England planned toshore up Britain's financial system quickly if Scotland votedfor independence last month, with extra banknotes ready in caseof big withdrawals from Scottish banks.

Scots voted on Sept. 18 to keep their centuries-old unionwith the rest of the United Kingdom. Opinion polls running up tothe referendum had suggested a tight outcome, and on Friday theBoE disclosed what might have happened if Scots had voted 'yes'.

It said it was ready if Scottish bank depositors andcreditors feared their money was unsafe because an independentScotland might have eventually adopt a new currency.

The BoE said in the event of a 'Yes' vote it would haveannounced two extra operations to pump money into the financialsystem and was ready to supply more cash to Scottish banks.

"If depositors, policyholders and other creditors believedthat an independent Scotland would adopt a new currency, theymight have preferred not to take the risk that their assetsmight be redenominated into that new currency," the BoE said.

Unlike England and Wales, where banknotes are all issued bythe BoE, Scotland has several different types of banknote incirculation, which are issued by local banks such as RBS, Bank of Scotland and Clydesdale.

Those notes are guaranteed by deposits at the BoE, whichsaid that if Scotland had voted for independence, it would havestressed that it would continue to ensure financial stability inScotland during the transition.

But even if Scottish banks pressed ahead with previouslyannounced plans to relocate to England, there could still havebeen financial instability linked to concerns that some assets -such as mortgages on Scottish homes - might be re-denominated.

"The (BoE) had been discussing with firms how they wouldmanage their potential currency exposures," the BoE said, addingthat "a key element of ... contingency planning work concernedthe potential provision of liquidity support to individualinstitutions".

CAPITAL UNDER SCRUTINY

The BoE's comments on Scotland came in the record of aquarterly meeting of its Financial Policy Committee (FPC), whichalso gave more detail on decisions announced last week on bankcapital buffers and a review of leverage ratios.

Last week - after concerns from banks and lawmakers - theBoE said it would give an opinion by the end of the month on themaximum amount of leverage that was appropriate for banks.

Banks are on tenterhooks over the leverage ratio they willhave to meet, with widespread expectations it will be higherthan the 3 percent interim level proposed under a global bankcapital accord known as Basel III.

The BoE originally intended to give a view next year, butsaid on Friday the FPC would hold an extra meeting on Oct. 15 todiscuss this. A record of the meeting would come out on Oct. 31.

Policymakers were also worried that financial markets hadunderpriced the risk of extreme events, and said this could makethem raise a separate counter-cyclical capital buffer for banks.

"Some of the FPC's core indicators suggested a furthereasing of the terms and conditions of credit in some markets,consistent with the possibility that tail risks were not beingpriced appropriately," the BoE said.

The FPC said that it would also take into account the resultof upcoming bank stress tests and other economic developmentswhen it next sets the buffer at its December meeting. (Reporting by David Milliken; Editing by Larry King)