ALTHOUGH Scottish Financial Enterprise is exploring the

possibility of sharing office space with CBI Scotland, the financial sector lobbying group has rejected any notion that it might merge with another

industry body.

Following an informal

re-appraisal by board members, SFE has issued a working

document to its 220 members explaining how the organisation intends to position itself in a devolved Scotland.

Although SFE will continue working closely with other groups on certain projects,

chairman Sir John Shaw said a full-scale union was out of the question.

''We have not thought of merging with another organisation, but that re-affirmation (of SFE's independence) was made in an environment in which we know there are some who think we should merge with another organisation,'' Sir John said.

In the past, SFE has worked with the likes of CBI Scotland and the Scottish Council Development and Industry.

The financial network also has a close relationship with Scottish Enterprise, although SFE is

privately-funded and receives only strategic assistance from the

Scottish Office.

The continuing debate over quangos has given rise to speculation that SFE might join forces with another organisation.

Sir John said although other groups had similar missions, none were devoted solely to the

financial community's concerns.

''Only an organisation like the SFE can represent its interests effectively,'' Sir John said.

The review was prompted by the imminent establishment of a Scottish Parliament and the forthcoming introduction of the euro.

Both developments are seen as posing significant new challenges to financial companies north of the Border.

Devolution might encourage London-based institutions to ''take their eye'' off the Scottish component of the UK financial

community, Sir John said.

Weakened awareness of the

sector in London and Brussels would be a concern, given that a Scottish Parliament will not be directly involved in technical

matters or regulation.

''So, putting it at its hardest and worst, there is a danger that

Scotland may slip between the two stools of Edinburgh and

Westminster,'' Sir John said.

''That is the basis of why we have done this stock-taking.''

Although the organisational objectives set out at the establishment of SFE 12 years ago remain, there will be a ''more explicit acknowledgement'' of the need to operate at the policy level.

Sir John said this would involve more lobbying at Westminster and Brussels, as well as concerted efforts to keep the Edinburgh-based Parliament informed about the Scottish financial community's needs and concerns.