PA LG R AV E M AC M I L L A N S T U D I E S I N BANKING AND FINANCIAL INSTITUTIONS S E R I E S E D I TO R : P H I L I P M O LY N E U X The Icelandic Financial Crisis A Study into the World´s Smallest Currency Area and its Recovery from Total Banking Collapse Ásgeir Jónsson Hersir Sigurgeirsson Palgrave Macmillan Studies in Banking and Financial Institutions Series Editor Professor Philip Molyneux Bangor University UK The Palgrave Macmillan Studies in Banking and Financial Institutions series is international in orientation and includes studies of banking systems in particular countries or regions as well as contemporary themes such as Islamic Banking, Financial Exclusion, Mergers and Acquisitions, Risk Management, and IT in Banking The books focus on research and practice and include up to date and innovative studies that cover issues which impact banking systems globally More information about this series at http://www.springer.com/series/14678 Ásgeir Jónsson • Hersir Sigurgeirsson The Icelandic Financial Crisis A Study into the World´s Smallest Currency Area and its Recovery from Total Banking Collapse Ásgeir Jónsson University of Iceland Reykjavik, Iceland Hersir Sigurgeirsson University of Iceland Reykjavik, Iceland Palgrave Macmillan Studies in Banking and Financial Institutions ISBN 978-1-137-39454-5 ISBN 978-1-137-39455-2 (eBook) DOI 10.1057/978-1-137-39455-2 Library of Congress Control Number: 2016955815 © The Editor(s) (if applicable) and The Author(s) 2016 The author(s) has/have asserted their right(s) to be identified as the author(s) of this work in accordance with the Copyright, Design and Patents Act 1988 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Cover illustration: Cover image © Bjarki Reyr EYJ / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Macmillan Publishers Ltd The registered company address is: The Campus, Crinan Street, London, N19XW, United Kingdom The economic, political and moral fallout of the collapse of Iceland’s banks was enormous This fascinating book gives a full and comprehensive account and analysis of the Icelandic banking crisis, its aftermath and the struggles and policies that led to Iceland’s remarkable recovery after it was hit by the “perfect storm” It will be required reading by scholars, regulators and policy makers interested in financial crises, their consequences and how to respond to them —Friðrik Már Baldursson, Professor of Economics, School of Business, Reykjavik University Iceland’s 2008 financial crisis and subsequent recovery is a rich story, and the debate on the causes and lessons to be learned will doubtless go on for years to come Ásgeir Jónsson’s Why Iceland was an important early contribution to the history of the prelude to the crisis and became considered a “must read” Now Ásgeir Jónsson and Hersir Sigurgeirsson have written a sequel on the financial sector recovery that has the promise to fall into the same category —Már Guðmundsson, Governor, Central Bank of Iceland v Contents Introduction 1.1 Gala at Harpa 1.2 One Letter and Six Months? 1.3 The Unfinished Business of 2011 1.4 Lessons Learned? 1.4.1 Lessons in Banking 1.4.2 Lessons in International Finance 1.5 The “Appalling Blank” 1 11 17 18 24 29 The Worst Case Scenario 2.1 Midnight at the Mansion 2.2 The Botched Bailout 2.3 A Rejection from the US Fed 2.4 The WaMu Way? 2.5 The Geyser Warning 2.6 A Force Majeure Action 2.7 God Bless Iceland 35 35 39 43 48 53 58 62 vii viii Contents Reykjavik on the Thames 3.1 The Problem with the Banks’ Owners 3.2 An Act of Terrorism? 3.3 Will the Payment System Collapse? 3.4 Reykjavik on the Thames 3.5 Sound and Fury Day Zero 4.1 When the Phones Went Silent 4.2 How to Value Assets? 4.3 How to Partition the Banks? 4.4 A Troubled Childhood: The Operation of the New Banks 4.5 Dealing with Blame, Shame and Punishment 103 103 111 115 Worthless Currency? 5.1 The Transfer Problem 5.2 The Icesave Debacle 5.3 The Carry Trade Hangover 5.4 The Current Account and the Capital Controls 5.5 The Currency Auctions 5.6 The Political Fallout 139 139 147 152 159 163 168 Meet the Hedge Funds 6.1 The Sir Philip Moment 6.2 Business at the Old Banks 6.3 The Asset Base of the Estates 6.4 Hedge Funds as Bank Owners 6.5 What Kind of Resolution? 6.6 Asset Return at Composition 6.7 Sharing the Profits with the Public 173 173 180 184 188 193 201 204 67 67 78 83 90 95 124 133 Contents ix The Faustian Bargain of Capital Controls 7.1 Would You Like to Own a Stake in Deutsche Bank AG? 7.2 The Operation of the Controls 7.3 The Capital Controls as a Bargaining Tool 7.4 The Carrot and Stick Approach 7.5 The Stability Contributions 7.6 The Textbook Case? 209 209 219 226 233 239 247 Dealing with Monetary Pollution 8.1 What Happens If You Quadruple the Money Supply in Four Years? 8.2 Doubling the Money Multiplier 8.3 The Love Letters 8.4 Helicopter Drops and the Bernanke Doctrine 8.5 The Different Meaning of Money in Small Currency Areas 8.6 Deposit Funding as a Currency Risk 8.7 The Stability Conditions 251 A Full Recovery: Fiscal Cost of the Crisis 9.1 To Cut the Link Between the Sovereign and Banks 9.2 Central Bank Collateralized Loans and Treasury Securities Lending 9.3 Recapitalization of the Commercial Banks 9.4 Recapitalization of the HFF and the Savings Banks 9.5 The CBI Loan to Kaupthing and State Guarantees 9.6 Special Taxes and Stability Contributions of the Estates 9.7 Fiscal Gains from the Capital Controls 9.8 A Net Gain 289 289 251 260 265 272 275 279 285 296 299 304 307 309 311 313 Bibliography 317 Index 341 List of Figures Fig 3.1 Fig 3.2 Fig 4.1 Fig 4.2 Moody’s rating of the Icelandic republic 1989–2009 68 The ratio of bank assets to GDP from 1998 to 2009 in Iceland and Moody’s rating of Kaupthing 2003–2009 and its predecessor Búnaðarbanki 1999–2003 (Source: The Central Bank of Iceland and own calculations) 70 Division of assets and liabilities between the estates and the new banks The old banks’ balance sheets are consolidated balance sheets as of end of June 2008 The estates’ assets are priority claims paid on the one hand and their assets at year-end 2014 on the other Liabilities of the estates are recognized claims as of year-end 2014 The assets and liabilities of the new banks are the part of the assets and liabilities that were transferred from the old banks Amounts in billion euros at the exchange rate 150 ISK per euro (Source: Six month interim financial statements of Glitnir, Kaupthing, and Landsbanki in 2008, annual financial statements of Glitnir, Kaupthing, and LBI for 2014 and annual financial statements of Íslandsbanki, Arion bank, and Landsbankinn 2008) 114 Household debt in Iceland as percentage of GDP from 2004 to year-end 2015 categorized according to contract terms (Source: Central Bank of Iceland) 130 xi Bibliography 335 Mortished, C (2008, April 3) Iceland puts the freeze on krona speculators as economy boils over The Times http://www.thetimes.co.uk/tto/business/eco nomics/article2147241.ece National Audit Office (2010, December 15) Maintaining the financial stability of UK banks: Update on the support schemes (Report by the comptroller and auditor general, HC 676, Session 2010-2011) https://www.nao.org.uk/wpcontent/uploads/2010/12/1011676.pdf O’Brien, D (2003) The lender-of-last-resort concept in Britain History of Political Economy, 35(1), 1–19 Official Journal of the Grand Duchy of Luxembourg: Recueil des Societes et Associations (2011, September 3) Outcry Grows Over Transfer of U.K Funds by Lehman (2008, September 22) Wall Street Journal online version http://www.wsj.com/articles/ SB122204286442761375 Parliamentary Committee on Foreign Affairs (2008, December 5) Nefndarálit um tillögu til þingsályktunar um samninga varðandi ábyrgð ríkissj s innstỉðutryggingum vegna innstỉðna í u´tibu´um íslenskra viðskiptabanka Evr opska efnahagssvỉðinu (Committee report on a parliamentary resolution on contracts for government guarantees of deposit insurance for deposits in branches of Icelandic commercial banks in the European Economic Area.) 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DV Index A Actavis, 76 Act on Bankruptcy, 196 ALMC, 195, 241, 245 Althingi, 61 AMC See asset management company (AMC) Andersen, Gunnar, 223 Anti-Terrorism, Crime and Security Act, 81, 84n18, 104n2 Arion Bank, 114, 122, 129, 132, 143, 181, 186n31, 221, 243, 245, 255, 282n40, 291, 300, 301, 301n19, 302, 302n20 Aserta, 223, 225 Ásgrímsson, Halldór, 59 asset management company (AMC), 23, 118–23, 134, 298 Autonomy Capital, 167 Avens, 311, 312 B Bagehot, Walter, 94, 269, 269n30, 270 Bakkavör, 71 balance of payments, 16, 24, 27, 144, 162, 196, 197, 213, 218n15, 230, 230n31, 231, 234, 240, 241, 256, 262, 278–85 Baldursson, Friðrik Már, 7n14, 64n26, 75n2, 87n24, 116, 116n21, 155n21 Note: Page numbers with “n” denote notes © The Author(s) 2016 Á Jónsson, H Sigurgeirsson, The Icelandic Financial Crisis, DOI 10.1057/978-1-137-39455-2 341 342 Index bank crisis, 21 Bank of England, 18, 42, 66, 79, 80, 93, 177, 269n30, 270, 273 bank tax, 235, 236, 309, 310 Banque Havilland, 179n25 Basel framework, 77 Baugur Investment Group, 174 Baupost, 189, 190, 190n42, 203, 204 Bayerische Landesbank (BL), 39, 40 Benediktsson, Bjarni, 197, 231, 239 Bernanke, Ben, 272–5, 275n37, 277, 278 Bjarnason, Björn, 99 Bjưrgólfsson, Thor, 76, 76n3 BN Bank, 178, 179 Brown, Gordon, 48, 65, 66, 78, 81, 82, 94, 95, 95n41, 97, 173 Buffett, Warren, 72 Búnaðarbanki, 69, 70 Burlington Loan Management, 206 BYR Savings Bank, 137, 306 C Cameron, David, 95 capital account, 14, 15, 25, 141, 164, 168, 209, 210, 212, 213, 216, 220, 224, 229, 248, 285, 286 capital contributions, 182, 291, 300–2, 305, 305n22 capital control liberalization, 233 capital controls, 5, 9, 14, 16, 17, 24–9, 95, 120, 125, 130, 146, 154, 159–65, 168, 187, 195–200, 197n61, 203, 204, 207, 209–49, 252, 256, 257, 259, 260, 277, 283, 285, 287, 295, 311–13 Capital Flow Management, 28, 216, 216n12 capital levy, 237 capital outflow(s), 25, 146, 168, 219, 220, 228, 237, 243, 259, 277 carry traders, 154, 156–9, 164, 215 CDS spreads, 8, 37, 56, 78, 265 Central Bank of Iceland (CBI), 10, 36, 81, 104, 143, 195, 214, 253, 290 Central Bank of Iceland Holding Company (ESÍ), 243–5, 298 Chancellor of the Exchequer, 66 coalition government, 39, 60 collateralized lending, 42, 258, 271 composition agreement, 16, 185n30, 192–4, 200, 201, 204, 231, 239, 240, 243, 311 corporate viking, 32, 74, 76 currency auction, 163–8, 222, 226, 234, 294, 312 currency crisis, 10, 29, 92, 212, 229, 278, 280 currency-linked, 15, 23, 125, 128, 156, 169, 186, 211, 255 currency swap, 44, 159 Cyprus, 219, 220, 236, 237 D Danske Bank, 55, 56 Darling, Alistair, 66, 79, 80, 82, 86, 90, 91n33, 92, 94 Davidson Kempner Capital Management, 189 debenture, 194 Index debt reconstruction, 240 debt relief, 6, 11, 12, 24, 123, 127, 171, 218, 253, 309 Deloitte LP, 112, 181 Depositors and Investors Guarantee Fund (DIGF), 52, 81, 236 Depositors Insurance Fund (DIF), 143, 144, 147, 150 Deutsche Bank, 4, 40, 46, 76, 192, 209–18 DIF See Depositors Insurance Fund (DIF) DIGF See Depositors and Investors Guarantee Fund (DIGF) Discovery Capital, 167 Dow Jones Industrial Index, 42 downgrades, 7, 42, 93, 145, 149 Drobny Global Advisors, 205 Drómi, 122, 123 DZ Bank, 144 E Eaton Vance, 167–8 ECB See European Central Bank (ECB) EEA See European Economic Area (EEA) EEA agreement, 50, 210, 218, 218n15 EESA See Emergency Economic Stabilization Act (EESA) EFTA Court, 90, 145, 148, 151, 169, 218n15 EFTA Surveillance Authority (ESA), 89, 90 Emergency Economic Stabilization Act (EESA), 41, 42, 42n5, 115 343 emergency legislation, 11, 20, 50, 53, 61, 63, 64, 66, 90, 105, 114, 117, 134, 142, 177, 267, 291, 299, 305, 316 Employers Union SA, 120 equity ratio(s), 13, 15, 73, 125, 132, 156, 157, 211, 255, 284 ESA See EFTA Surveillance Authority (ESA) estates, 12, 53, 73, 106, 143, 176, 184–8, 212, 251, 291, 309–11 European Central Bank (ECB), 18, 38, 42, 44, 46–8, 85, 217, 258, 265, 267, 278, 282 European Commission, 89, 294 European Common Market, 52 European Council, 89 European Court of Human Rights, 100 European Economic Area (EEA), 47, 50, 52, 88n28, 90, 105, 145, 156, 209, 210, 212, 218, 218n15, 219, 258 European Union (EU), 6, 9, 27, 33, 38, 42, 44, 50, 52, 77, 89, 92, 94, 156, 169, 209–11, 214, 217–19, 258 Eurozone, 5, 17, 219 Exista, 71–3 exit tax, 165, 226–9, 226n25, 234, 235 expatriation tax, 237, 238 F Federal Deposit Insurance Corporation (FDIC), 49, 50, 109 344 Index Federal Reserve (Fed), 18, 38, 43–8, 56, 85, 158, 214, 252, 274 fiat money, 272, 275 FIH, 61, 66, 70, 96, 117, 153, 179, 292, 298, 307, 307n25, 308 finance minister(s), 79, 231, 273 Financial Services Compensation Scheme (FSCS), 81 Financial Supervisory Authority (FSA), 5, 14, 21, 39, 42, 49, 50, 53, 60, 61, 63–5, 81–4, 90, 97, 98, 103, 104, 109, 111, 112, 115, 118, 119, 122, 123, 126, 129, 134, 136, 177, 185, 186, 186n33, 222, 223, 299, 306 financial system(s), 19, 19n23, 25, 26, 29, 33, 37, 43, 44, 54, 58, 65, 72, 75, 76, 78, 82, 85, 91, 92, 94–6, 99, 142, 146, 149, 163, 199, 219, 220, 226, 256, 258–60, 268n27, 271, 279, 280, 282, 283, 285, 290, 310, 311 fiscal cost, 10, 17, 26, 289–316 Fitch Ratings, 149 FL Group, 73–5 foreign direct investment (FDI), 9, 12, 159, 161 Friedman, Milton, 272, 272n34, 274, 275n37, 277 G general claims, 184, 185, 189, 298 German Commerzbank, 74 Geyser Crisis, 32, 53, 55–8, 60, 73, 214 Gísladóttir, Ingibjưrg Sólrún, 39, 89 Gíslason, Benedikt, 197, 197n61, 200n64 Glitnir, 7, 14–17, 37, 39–43, 48, 52, 61, 64, 73, 75, 93, 105, 106, 108n12, 111, 113, 114, 129, 132, 137, 143, 174, 178, 180–3, 185–96, 186n31, 187n34, 190n40, 200–5, 218, 230–2, 234, 240–2, 244, 245, 248, 254, 254n9, 256, 276, 290–2, 296, 310 Gnúpur, 75 Goldman Sachs, 47 good bank-bad bank, 10, 22, 115, 116, 116n23, 120 governor, 36–40, 59, 79, 97, 98, 119, 156, 197n58, 220, 232, 253, 262, 265, 266, 272, 274, 296 Grant Street, 116, 116n23, 117, 121 Great Depression, 37, 273, 274 Green, Sir Phillip, 174, 175 Grímsson, Ĩlafur Ragnar, 149–51 guarantee capital, 305, 306 Gbjartsdóttir, Ingibjưrg, 200n64, 222, 223 Gmundsson, Ágúst, 71 Gmundsson, Bjưrgólfur, 76 Gmundsson, Lýður, 71 Guðmundsson, Már, 232, 253 Gunnlaugsson, Sigmundur Davíð, 118, 169–71, 197, 231, 233, 235, 239, 251–4, 251n1, 287 H Haarde, Geir, 35–9, 48, 49, 53, 59, 62–4, 66, 82, 83, 97, 98, 100, 101, 109, 205, 307 Index haircut(s), 17, 19, 29, 40, 130, 200, 218, 226, 233, 247, 281 Hauksson, Ĩlafur Þór, 136 helicopter drop, 271–5, 272n34, 275n37, 277, 279 Hendry, Hugh, 205 Herbertsson, Tryggvi Thor, 86 Heritable bank, 82, 103, 115, 179, 180, 185 HFF See Housing Financing Fund (HFF) hold-outs, 194 Housing Financing Fund (HFF), 105, 153, 225, 265, 290, 291, 304–7, 312 I Icebank, 245, 265, 266, 297, 298, 305 Icelandair, 13, 75, 161 Icelandic stock exchange (ICEX), 69, 71, 72, 75, 78, 108, 133 Icesave, 13, 16, 18, 43, 45, 52, 57, 64–6, 80, 81, 86–90, 100, 143–52, 152n20, 168, 169, 178, 182, 185, 189, 197, 198, 204, 205, 207, 215, 233, 252, 255, 290, 291 ICEX See Icelandic stock exchange (ICEX) IMF See International Monetary Fund (IMF) InDefence, 89, 169, 171, 197, 233, 247n72 Independence Party, 39, 98–100 indexation, 24, 125, 128, 129, 153, 224, 225, 268 ING, 46, 82, 103 345 International Monetary Fund (IMF), 1, 4–6, 8, 10, 23, 38, 48, 86, 87, 94, 119, 138, 142–4, 146, 148, 198, 211–19, 229, 240, 248, 293–6, 304 ISB Holding, 181 Íslandsbanki, 15, 114, 129, 132, 143, 181, 186n31, 210, 242, 244, 245, 248, 255, 261, 273, 282n40, 291, 300, 301, 301n19, 302, 302n20, 306 J Jóhannesson, Jón Ásgeir, 40, 41, 174–6 Joly, Eva, 137 Jónsson, Jónas Fr., 39, 53, 60 Jónsson, Jón Gunnar, 118, 118n29 Josefsson, Mats, 23, 119, 138 JP Morgan, 123, 307 K Kaupskil, 181 Kaupthing, 7, 37, 68, 103, 143, 176, 211, 254, 290, 307–9 Kaupthing Edge, 65, 66, 82, 103, 144 Kaupthing Singer & Friedlander (KSF), 18, 42, 48, 65, 82, 103, 104, 115, 179, 185 Keflavík Savings Bank, 306, 316 Keynes, George Maynard, 140–2, 274, 275, 276n38 King, Mervyn, 79 Kitchenware revolution, 97 346 Index Krugman, Paul, 1, 6n12, 8, 8n16, 8n17, 9, 26, 93, 93n36, 94, 94n39, 218n14 KSF See Kaupthing Singer & Friedlander (KSF) Kvika, 131 L Labour Party, 78 Landsbanki Freezing Order, 81 Landsbanki Íslands (LBI), 114, 145, 152, 183, 186n31, 187, 187n34, 188, 191, 192, 192n51, 193, 232, 240, 241, 243, 300n16, 310 Landsbankinn, 105n4, 114, 181, 186n31, 188, 203, 243, 282n40, 291, 299, 300, 300n16, 306, 307 Landsdómur, 99 Left-Green party, Lehman Brothers, 11, 41, 42n5, 65, 122, 180 liberalization, 197, 212, 216, 227–9, 233, 240, 247, 285, 286 liquidation route, 197–9, 232–4 liquidity, 7, 18, 20, 21, 29, 32, 33, 41–4, 47, 51, 53, 55, 59, 65, 75, 78, 79, 81, 82, 86, 91, 93, 95, 104, 108, 131, 144, 145, 177–9, 235, 255, 257–60, 264, 265, 269, 270, 274–7, 276n38, 280–2, 284, 292, 293, 312 London interbank offered rate (LIBOR), 211 Loomis Sayles, 168 love letters, 265–71, 277, 296–9, 313 M Malaysia, 214, 220, 226–9 margin call(s), 42, 66, 74–6, 108, 109 Mathiesen, Árni, 80 Maxwell, Clive, 86, 86n22 McKillop, Sir Tom, 79 medium term note (MTN), 54, 57 Mellon Bank, 116 Merkel, Angela, 76 Merrill Lynch, 32, 51, 118 Ministerial Committee on Economic Affairs, 197 ministry of trade and commerce, 39 mitigating actions, 242–5 money multiplier, 260–5, 284 money supply, 199, 246, 254, 257, 258, 263, 271, 279, 283, 284 Moody’s, 7, 18, 52, 59, 67, 68, 70, 149, 212, 247, 297, 297n8 moratorium, 22, 134, 144, 177, 178, 180 MP Bank, 123, 206, 245 N national asset management company (national AMC), 23, 118–23, 134, 298 nationalization, 4, 33, 51, 93, 235 national schooner, 212, 214, 218 NATO See North Atlantic Treaty Organization (NATO) New Glitnir, 15, 106, 129, 132, 143, 181 New Kaupthing, 15, 109, 110, 122, 123, 129, 134, 143, 181, 215, 221 Index new Landsbanki, 105, 106, 112, 143, 291 non-performing, 11, 13, 15, 25, 116, 116n23, 118, 120, 124, 129, 134, 218 Nordea, 40, 41, 119 North Atlantic Treaty Organization (NATO), 45, 82, 86, 89 O Oddsson, Davíð, 36–40, 98, 156, 266n24, 296 offshore market, 162, 163, 224 Oliver Wyman, 112 online retail funding, 47 operating currency, 156, 157 overhang, 14, 146, 159, 163, 164, 166, 167, 198, 220, 226, 229, 277, 312 P Pálmadóttir, Ingibjörg, 175 Panama Papers, 287 pari passu, 19, 50, 52, 61, 90, 290 Parliamentary Special Investigation Commission, 265n23, 266, 266n24, 267n25, 307 Paulson and Company, 191, 192 Paulson, John, 191, 191n47, 192 pension funds, 36, 44, 96, 106, 110, 157, 308, 309, 312 pension system, 124 Peston, Robert, 79, 79n7 Pétursson, Margeir, 206, 206n76 primary dealer(s), 297 347 prime minister, 5, 20, 35–9, 43, 48, 59, 62n25, 65, 82, 83, 86, 94, 95, 100, 109, 118, 119, 123, 143, 171, 197, 197n58, 197n59, 217, 235, 251n1, 252, 253, 296, 307 priority claim(s), 14, 16, 61, 90, 96, 109, 110, 113, 114, 145, 151, 165, 182–6, 189, 195, 204, 291, 299, 316 Progressive party, 99, 118, 169, 207, 235, 251, 251n1, 252, 253n6 Purchase and Assumption (P&A), 106, 299, 306 Q quantitative easing (QE), 251–87 Quantum Partners, 190 R recapitalization, 10, 15, 30, 51, 79, 95, 96, 258, 290, 291, 296, 299–307, 313 referendum(s), 13, 87, 89, 149–51 repurchase (repo), 10, 92, 111, 131, 196, 213, 258, 259, 265, 266, 269, 270 reserve currency(ies), 7, 9, 18, 92, 278, 279 reserve requirements, 28, 257, 258, 262, 263, 263n19 resolution committee(s), 64, 81, 134, 177, 178, 181, 183, 300 Riksbank, 66, 213 Robinson, Nick, 82 348 Index Royal Bank of Scotland (RBS), 54, 58, 79, 90, 92–4, 96, 97 S Saga Capital, 265 Samherji, 162, 225 Savings Bank of Reykjavik (SPRON), 22, 72, 122, 123, 245 savings banks, 119, 120, 122, 123, 126, 130, 131, 178, 291, 304–7, 305n22, 306n23, 310 Securities Exchange Commission (SEC), 189 Seller’s loan, 308 senior bonds, 19, 19n23, 51, 52 Sigfússon, Steingrímur J., 5, 6, 120 Smárason, Hannes, 73, 74 snow overhang, 159 Social Democratic Alliance, 39, 98, 100 Soros, George, 190–2, 205 Sparebanken, 178, 179 special drawing rights (SDR), 144 special prosecutor, 99, 136–8, 225 SpKef Savings Bank, 306 SPRON See Savings Bank of Reykjavik (SPRON) stability conditions, 200, 208, 235, 239–44, 245n70, 246, 285–7 stability contributions, 184, 239–47, 259, 268n29, 295, 301, 309–11, 313, 316 stability levy, 234–7, 251–87 stability tax, 16, 25, 200, 235–7, 239, 240, 246, 247, 253, 259, 310 stand-by agreement, 215 Steering Committee on Liberalization, 197 Stiglitz, Joseph E., 1, 214 Straumur-Burðarás, 156, 222, 223, 245 subordinated, 243, 245, 300, 300n18, 301, 302 Supreme Court, 99, 127–9, 137, 169, 197n59, 197n61, 199, 223, 234, 238 T terrorist legislation, 50, 103 Thomas, Richard, 32, 32n32, 51 too-big-to-fail, 18, 20, 49, 52, 75, 76, 109, 219, 270, 289 too-big-to-save, 19, 44, 48, 92, 289 tourism, 13, 17, 161, 162 transfer problem(s), 14, 25, 139–71, 187, 198, 218, 231, 232, 247, 254, 284–7, 294 treasury, 4, 10, 17, 22, 85, 86, 93, 94, 96, 104, 105, 109, 111–13, 111n14, 120, 140, 143, 145, 147, 150, 151, 158, 163–5, 167, 177, 181, 182, 197n61, 217, 228, 229, 234, 236, 237, 243, 245–8, 258, 259, 262, 267, 268, 271, 273, 286, 289n1, 291, 293–310, 312–16 Trichet, Jean-Claude, 265 Trump, Donald, 73, 74, 74n1 Turner, Adair, 79 twin crises, 212n5 Index U University of Iceland, 37, 37n2 Útrás, 68, 69 V Vátryggingafélag Íslands (VIS), 72 VBS, 265 vulture capitalists, 173 vulture funds, 170, 189, 206, 252, 253 349 W Washington Mutual Bank (WaMu), 48–53 winding-up board(s), 113n18, 181, 184, 189, 195, 196, 207, 231, 232, 239, 241, 256 Y Yankee bonds, 234 ... de grandeur and its Icarus-style downfall? Set against the backdrop of Faxa Bay and the Esja mountain range to the north, Harpa sits on the east side of Reykjavík’s old harbor like a giant iceberg... institutions and gave priority to deposits The legislation also gave the Icelandic Financial Supervisory Authorities (FSA) the power to seize these guaranteed deposits and Icelandic assets from the collapsing... in the sense that it was credible and the bank run stopped Ireland was a part of the euro area and was able to supply its banks with a reserve currency With the guarantee in place, harsh austerity