Iceland Banking Collapse
About Iceland Banking Collapse
Icelands three major banks, Kaupthing, Landsbanki, and Glitnir, collapsed in October 2008 within days of each other. The banks had assets worth 9 times Icelands GDP, making the collapse proportionally the largest banking crisis in history. The banks had funded rapid international expansion with short term wholesale funding. When credit markets froze after Lehmans collapse, the banks could not refinance. Icelands currency, the krona, plummeted. Inflation and unemployment soared. Iceland let the banks fail rather than bail them out, a controversial decision. Iceland also jailed dozens of bankers, contrasting with the US and UK where no senior bankers went to prison. Icelands recovery was relatively quick, with growth resuming in 2011.
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