Meltdown Iceland
Contemporaneous reporting on the collapse and the Icesave dispute.
Summary
Roger Boyes covered the Icelandic collapse for The Times and wrote this narrative account within a year of the October 2008 failures. It is journalism aimed at a general readership rather than financial analysis.
The narrative covers the privatisation of the banks in the early 2000s, the small group of businessmen who acquired and expanded them, the buying spree in British retail and property, the Icesave online deposit accounts, and the collapse of Glitnir, Landsbanki and Kaupthing within a week. Boyes gives substantial space to the social side: the fishing quota system that created the first Icelandic fortunes, the country's small elite and the personal connections within it, the currency carry trade that brought foreign money in, and the protests that followed the collapse.
The book was written fast and shows it. It predates the Special Investigation Commission report, the criminal prosecutions, and the detailed reconstruction of the banks' balance sheets, and it contains errors of detail that later accounts corrected. Readers wanting the mechanics should go to Jonsson and Sigurgeirsson or to Bibler; readers wanting the political aftermath should go to the academic collections. This is the readable contemporaneous narrative.
Key takeaways 7
- Iceland's transferable fishing quota system created the first concentrated private fortunes and the group that later bought the banks.
- The banks were privatised to politically connected buyers who lacked banking experience.
- High Icelandic interest rates attracted carry trade inflows that funded domestic credit expansion and made the currency vulnerable.
- Icesave retail deposits in Britain and the Netherlands funded Icelandic bank expansion and created cross-border liabilities the state could not cover.
- Icelandic businessmen used bank credit to acquire British retail and property assets at the top of the cycle.
- Boyes argues that the small size of Icelandic society removed the arm's-length relationships that supervision requires.
- The collapse of all three banks within a week shows they had been funding each other and holding each other's paper.
Who should read it
Readers wanting a readable contemporaneous narrative of the Icelandic collapse, with the more accurate technical accounts read afterwards.
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