- exchange - policy competence are not likely to be delegated to the home rule of the faroe islands. a currency union would thus entail that the faroese authorities acknowledge - formally and clearly - that the decision - making competence regarding monetary and foreign - exchange policy rests solely with the danish national authorities, including danmarks nationalbank. in a currency union the situation would, in practice, be unchanged. the currency would still be danish kroner, and danmarks nationalbank would continue to conduct monetary policy. this means that the faroese authorities would have no autonomy as regards monetary and interest - rate policy. this is unchanged from the current situation. thus, it appears that delegation of monetary and foreign - exchange policy to the home rule with simultaneous conclusion of a currency union with denmark would be a complex way of maintaining status quo. separate currency - fixed - exchange - rate policy if a decision is made for the faroe islands ( or greenland ) to have their own currency, the options are the same as in other currency areas. however, the currency would be very small, and the narrow business structure would present a number of special challenges. the “ strongest ” fixed - exchange - rate policy is a currency board, whereby the local currency is completely fixed vis - a - vis another currency. this regime is used today by e. g. estonia, which applies a currency board with a fixed exchange rate vis - a - vis the euro. an initial option for the faroe islands could be a currency board vis - a - vis the danish krone in a ratio of 1 : 1. a currency board entails the establishment of a central bank to set the monetary - policy interest rate and intervene in the foreign - exchange market to stabilise the exchange rate. however, the central bank ’ s options are rather mechanical. these - often statutory - restrictions on the central bank are imposed to ensure credibility. history shows examples of successful currency boards, e. g. estonia, and total failures, e. g. the currency board in argentina. a country opting for a currency board has to defend its own currency. in case of speculation against the currency no help should be expected from the country to whose currency the currency in question is pegged. speculation may therefore require dramatic interest - rate increases. elimination of the risk of collapse in the event of speculation requires a guarantee agreement with a highly credible external party. for the faroe islands, this could e. g. mean a guarantee from the

one of the first countries to introduce the option of electronic stock - exchange trading. nevertheless, government bonds were traded mainly over the phone up to the introduction of mts in november. the trading platform is now electronic, and the quality of price information available during the day has increased considerably. to consider the interests of small investors, danmarks nationalbank has concluded a special agreement with a number of danish banks on quoting prices for small trades on the copenhagen stock exchange. this agreement entered into force recently and has given small investors the possibility to have their trades in government bonds executed directly on the stock exchange. as mentioned, the eu has for many years facilitated progress towards financial integration in order to create a single market for financial services. recent years have shown that this development is well underway. however, the eu cannot plan such a development. financial integration is driven by the markets. it is up to the authorities to respond to this development and if necessary adapt the rules to facilitate it.