THE DEVELOPMENT OF THE FAROESE FINANCIAL- SYSTEM

With certain exceptions the development of the Faroese financial syste m has followed the same pattern as in Denmark. Banking legislation is essentially identical. Because of the importance of the fisheries, dif ficulties in that sector will tend to have immediate repercussions for the banks. The Faroe Islands have experienced two serious bank crises , in 1951-52 and 1992-93. Both reflected a change from a too vapid eco nomic expansion into recessionary conditions. The fisheries suffered f rom overcapacity, and bank lending had become too impudent. The Home G overnment injected emergency capital, to a particularly marked degree in 1993. The two largest banks merged in 1994. The new bank has so far done very well.