The Faroe Islands’ success story
The Faroe Islands are a small archipelago of 18 islands in the North Atlantic, with a population of about 50,000 people. They are an autonomous territory within the Kingdom of Denmark, but have their own parliament, flag, currency, and language. They are also home to one of the most successful and innovative banking sectors in Europe.
The Bank of the Faroe Islands, or BankNordik, is the largest bank in the country, with a market share of over 60%. It was founded in 1906 as a cooperative bank, and has since grown to become a modern and diversified financial institution, offering services such as retail banking, corporate banking, asset management, insurance, and pension funds. The bank has branches in all the main towns and villages of the Faroe Islands, as well as in Denmark and Greenland.
The bank has been praised for its resilience, profitability, and social responsibility. It has weathered several economic crises, such as the collapse of the fishing industry in the 1990s, the global financial crisis in 2008, and the Covid-19 pandemic in 2020. It has consistently delivered high returns on equity, averaging 14.5% in the past decade. It has also invested in the development of the local community, supporting initiatives such as renewable energy, education, culture, and sports.
The lessons for Scotland
Scotland, like the Faroe Islands, is a small nation with a rich history and culture, and a strong sense of identity. It also faces similar challenges, such as geographical remoteness, dependence on natural resources, and exposure to external shocks. However, unlike the Faroe Islands, Scotland does not have its own currency or central bank, and is part of the United Kingdom, which has one of the most centralized and concentrated banking systems in the world.
Scotland’s banking sector is dominated by a few large banks, such as RBS, Lloyds, and HSBC, which are headquartered in London and operate mainly in England. These banks have been accused of neglecting the needs and interests of Scottish customers, businesses, and communities, especially after the financial crisis, when they received massive bailouts from the UK government, but reduced their lending, closed branches, and cut jobs in Scotland.
Scotland needs a more diverse and competitive banking sector, that can provide better access to finance, foster innovation and entrepreneurship, and support the transition to a low-carbon and inclusive economy. The Faroe Islands can offer some valuable insights and inspiration for Scotland, such as:
- The importance of having a locally owned and controlled bank, that understands the specific characteristics and opportunities of the Scottish market, and can tailor its products and services accordingly.
- The benefits of having a cooperative and stakeholder-oriented bank, that is accountable to its members, customers, employees, and society, and that reinvests its profits in the local economy and environment.
- The advantages of having a diversified and integrated bank, that can offer a wide range of financial solutions, from savings and loans, to insurance and pensions, and that can leverage its network and expertise across different regions and sectors.
The way forward for Scotland
Scotland has the potential and the ambition to become a more prosperous and sustainable nation, with a vibrant and dynamic economy, and a fair and inclusive society. To achieve this vision, Scotland needs a banking sector that can support and enable its growth and development, and that can reflect and respect its values and aspirations.
The Faroe Islands have shown that it is possible to create and sustain a successful and innovative banking sector, even in a small and remote country, with limited resources and markets. Scotland can learn from their example, and build on its own strengths and opportunities, to develop a banking sector that can serve its people and planet, and that can be a source of pride and inspiration for future generations.
