Icelandic Crisis
Introduction:
Iceland:
Iceland is a European North Atlantic country with a population of 321,800 according to statistics Iceland (2013). Reykjavik is the capital and the Icelandic monetary unit is the króna – ISK. Iceland is a parliamentary constitutional republic with a stable democracy. Iceland has been known for its rich natural resources (fisheries, renewable energy and water), as well as being a significant tourist attraction because of its amazing natural beauty and its famous volcanoes.
Iceland economy:
The Icelandic economy used to depend completely on the natural resources, before Iceland’s government began a broad policy of financial deregulation. In 2000, the Icelandic government started privatization the bank sector. The Icelandic economy entered the European free market. The currency policy has changed to let the krona float freely. (The Central Bank of Iceland)
After these radical changes, the young Icelandic financial system grew faster than anywhere else in the world. The commercial Icelandic banks have attracted huge amounts of foreign Money. The Icelandic banking system has expanded largely, preforming very well and reporting good financial indicators which were above normal. (International Monetary Fund 2008)
The new banking system played a major role in converting Iceland from one of the poorest into one of the richest countries in Europe during a very short period. In 2005, for the first time in the contribution of the financial system to the GDP has exceeded the contribution of the fishing sector. (Financial Supervisory Authority, 2006). In 2007, the net Interest income for the commercial Icelandic banks kept increasing to be 18% Higher than in 2006. Not ignoring the Massive amount of Banks Assets and liabilities, which were much huger than the Icelandic GDP. The banking Assets expanded as the Graph shows to be in 900% of the Icelandic GDP.
Source: Financial Supervisory Authority (2010)
The extent to which the global financial
Iceland:
Iceland is a European North Atlantic country with a population of 321,800 according to statistics Iceland (2013). Reykjavik is the capital and the Icelandic monetary unit is the króna – ISK. Iceland is a parliamentary constitutional republic with a stable democracy. Iceland has been known for its rich natural resources (fisheries, renewable energy and water), as well as being a significant tourist attraction because of its amazing natural beauty and its famous volcanoes.
Iceland economy:
The Icelandic economy used to depend completely on the natural resources, before Iceland’s government began a broad policy of financial deregulation. In 2000, the Icelandic government started privatization the bank sector. The Icelandic economy entered the European free market. The currency policy has changed to let the krona float freely. (The Central Bank of Iceland)
After these radical changes, the young Icelandic financial system grew faster than anywhere else in the world. The commercial Icelandic banks have attracted huge amounts of foreign Money. The Icelandic banking system has expanded largely, preforming very well and reporting good financial indicators which were above normal. (International Monetary Fund 2008)
The new banking system played a major role in converting Iceland from one of the poorest into one of the richest countries in Europe during a very short period. In 2005, for the first time in the contribution of the financial system to the GDP has exceeded the contribution of the fishing sector. (Financial Supervisory Authority, 2006). In 2007, the net Interest income for the commercial Icelandic banks kept increasing to be 18% Higher than in 2006. Not ignoring the Massive amount of Banks Assets and liabilities, which were much huger than the Icelandic GDP. The banking Assets expanded as the Graph shows to be in 900% of the Icelandic GDP.
Source: Financial Supervisory Authority (2010)
The extent to which the global financial