Scotland has to realise the pound has been a core part of its success

The alternatives to a currency union include a completely independent currency, passive acceptance of a monetary policy designed in London for the rest of the UK, or, assuming Scotland rejoins the European Union, eventual membership of the euro. In all these circumstances, the transition from the existing currency union would be complex and fraught with danger.

At the extreme, uncertainty over the Scotland’s currency arrangements could prompt capital flight from the country, leaving its financial system in a parlous state. This could, in turn, place enormous pressure on Scotland’s future fiscal policies. Scotland would give up the benefits of being part of a larger fiscal union with the stability that offers in terms of scale, diversification and fiscal transfers

Introducing its own currency, should it choose to do so, would be an enormous challenge for an independent Scotland. It would take many years for the country to establish its credibility. In the meantime businesses and consumers would face significant additional transactional costs.

Choosing an informal link to sterling, so called "sterlingisation", would help avoid these transaction costs. However, this would place enormous pressure on Scotland’s future fiscal policies – with no monetary policy levers these would be the only meaningful adjustment mechanism to address financial and economic shocks. Scotland would not be able to print currency and there would be no real lender of last resort to the Scottish financial system.

Monetary policy itself would be imported from the rest of the UK; Scotland would be faced with monetary policy implementation without representation – a very odd form of independence. Scotland’s fiscal policy would have to be permanently constrained in order to provide a "back-stop" for the economy.

In all of these scenarios, Scotland’s borrowing costs and those of its businesses and consumers would rise – at least in the near term.

The argument that Scotland could retain currency union after independence has already been dispelled by the three major Westminster political parties. That decision is wholly consistent with the actions that have been taken in the aftermath of the financial crisis to minimize the risks to UK taxpayers from financial sector shocks arising in overseas and wholesale banking operations. It is also consistent with the knowledge gained from recent events in the eurozone, which have highlighted the challenges inherent in managing a currency union without political and fiscal union. It would be unreasonable to expect any government to commit its own taxpayers’ funds, even contingently, to underpinning the financial system of another independent country.

The debate on independence has served to highlight the enormous advantages that currency union brings to Scotland within the existing political and fiscal union.

It will be for the Scottish people to decide whether other perceived benefits of independence compensate for the costs and constraints of giving up currency union. It is not a trivial judgment.

Douglas Flint is group chairman of HSBC. He writes in a personal capacity

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