Iceland 2008

About Iceland 2008

Icelands three largest banks, Kaupthing, Landsbanki, and Glitnir, collapsed in October 2008. Their combined assets were approximately 14 times Icelands GDP. The banks had grown aggressively using wholesale funding and foreign deposits. When credit markets froze, the banks could not refinance. The UK government used anti terrorism laws to freeze assets of Landsbanki subsidiary Icesave. Iceland guaranteed domestic deposits but not foreign ones. The Icelandic krona lost 80 percent of its value. GDP fell by 10 percent. Unemployment rose from 1 percent to 9 percent. Iceland received a 2.1 billion IMF loan. Unlike most crisis countries, Iceland let banks fail, prosecuted bankers, and maintained social spending. Iceland recovered faster than countries that bailed out banks.