Gambling for resurrection in Iceland

Friðrik Már Baldursson, Richard Portes 06 January 2014

a

A

The demise of the three large Icelandic banks, just after the fall of Lehman Brothers, was a key event in the spread of the financial crisis. A couple of weeks before its collapse in October 2008, Kaupthing bank announced that the Qatari investor Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani had bought a 5.01% stake. This briefly boosted market confidence in Kaupthing (Financial Times 2008). What market participants did not know was that Kaupthing illegally financed the deal, which was without risk to al-Thani.

a

A

Topics:  Financial markets

Tags:  Iceland, financial crisis, moral hazard, banking, banks, gambling for resurrection

Capital controls and the resolution of failed cross-border banks: The case of Iceland

Friðrik Már Baldursson, Richard Portes 12 November 2013

a

A

A large amount of carry trade was drawn to Iceland in the boom leading up to the crisis of early October 2008 (Danielsson and Arnason 2011, Baldursson and Portes 2013a). As pressure mounted on the Icelandic banks, investors increasingly chose to exit the krona, which depreciated by 25% during the week before the banks collapsed. As the banks went down, the krona depreciated even further.

a

A

Topics:  Europe's nations and regions Global crisis

Tags:  Iceland, capital controls, cross-border banks

Iceland’s post-Crisis economy: A myth or a miracle?

Jon Danielsson 21 May 2013

a

A

When the Global Crisis struck in September 2008, all eyes were on the US (Eichengreen and Baldwin 2008). Iceland, however, was the first country to really suffer. Its three major banks collapsed in the same week in October 2008, and it became the first developed country to request assistance from the IMF in 30 years. GDP fell 65% in euro terms, many companies went bankrupt and others moved abroad. At the time, a third of the population considered emigration as a good option (Danielsson 2008).

a

A

Topics:  Global crisis

Tags:  Iceland, Eurozone crisis

Deposit insurance after Iceland and Cyprus

Anne Sibert 02 April 2013

a

A

The facts are now well known. The largest banks in Cyprus are insolvent, but too big for the government of Cyprus to save – at least if it wanted to avoid the ‘double drowning’ fate of Ireland. The government, trying to rescue banks, found itself needing a rescue.

a

A

Topics:  EU institutions Financial markets Macroeconomic policy

Tags:  Iceland, deposit insurance, bank bailouts, Cyprus, bail-ins

The capital controls in Cyprus and the Icelandic experience

Jon Danielsson 28 March 2013

a

A

The Cypriot government, European authorities and the IMF have concluded that capital controls are the best way to prevent a total collapse of the Cypriot financial system. Motivated by the obvious fear that anybody with money left over in Cyprus will seek to take their money out as soon as possible, temporary capital controls are to be put in place to prevent this. We are told that they will be limited in scope and temporary. Hopefully, for the Cypriots’ sake, that is correct.

a

A

Topics:  EU institutions Macroeconomic policy

Tags:  Iceland, capital controls, Eurozone crisis, Cyprus

Constitution making in action: The case of Iceland

Thorvaldur Gylfason 01 November 2012

a

A

Strangely, democratic states often allow tiny minorities to get away with murder by exploiting the masses, big time. In Europe and the US, there is presently a fairly widespread feeling that this is what many bankers have done (Johnson and Kwak 2010). So let’s begin with a counterfactual thought experiment. What if the Roosevelt administration and Congress had introduced the Glass-Steagall Act of 1933 as a constitutional amendment rather than as an ordinary piece of legislation? Clearly, it would then have become that much harder to reverse Glass-Steagall half a century later.

a

A

Topics:  Politics and economics

Tags:  Iceland, constitutions

Finance and constitutions

Thorvaldur Gylfason 11 April 2012

a

A

In his 2009 book, The Regulatory Response to the Financial Crisis, Charles Goodhart discusses the financial crisis, what went wrong, and what needs to be done (Goodhart 2009). The standing assumption is that regulatory reforms will rest at their current level of law, namely regulatory bodies and rules approved by lawmakers. But, as I explore in this column, perhaps prompt corrective action belongs in constitutions.

a

A

Topics:  Global crisis International finance

Tags:  Iceland, financial regulation, Eurozone crisis

Capital controls are exactly wrong for Iceland

Jon Danielsson, Ragnar Arnason 14 November 2011

a

A

There is a curious difference between how foreign and local economists see the wisdom of capital controls in Iceland. In a recent IMF-government of Iceland conference1, two Nobel Prize winners in economics, along with senior IMF representatives, expressed strong support for the capital controls. The Icelandic economists addressing the conference were not as enthusiastic.

a

A

Topics:  Europe's nations and regions Global crisis International finance

Tags:  IMF, Iceland, capital controls

Iceland’s programme with the IMF 2008–11

Friðrik Már Baldursson 08 November 2011

a

A

When Iceland’s three main banks collapsed on 7–9 October 2008 it became obvious that Iceland would suffer a balance-of-payments crisis unless it could get outside support. A currency crisis was already under way (Figure 1). After some initial doubts it became clear to the government that it had no other option than to seek help from the IMF. The fund would not only provide financing and expertise, but also some much-needed credibility.

Figure 1. Trade-weightedexchange rate of the krona and Iceland’s CDS spread

a

A

Topics:  Europe's nations and regions

Tags:  IMF, Iceland, global crisis, capital controls

Was the IMF programme in Iceland successful?

Jon Danielsson 27 October 2011

a

A

Iceland has just become the first industrialised country to graduate from an IMF programme in over 30 years. The IMF claims the programme has been an unqualified success:

Iceland has successfully completed its Fund-supported programme. Key objectives have been met: public finances are on a sustainable path, the exchange rate has stabilised, and the financial sector has been restructured. Strong policy implementation has underpinned this success (IMF 2011).

a

A

Topics:  Europe's nations and regions Global crisis

Tags:  IMF, Iceland, global crisis

Pages