Much has changed in Iceland in the past 15 years. The country's finance industry expanded rapidly after its banks were privatised in early 2000, only to collapse in dramatic fashion in the aftermath of the 2008 financial crisis. This led the country’s three largest commercial banks to collapse and then be nationalised. Their three successor banks have changed their approach, and have since recovered and boosted their capital ratios – but insolvency proceedings at the old banks are still under way.
It was the huge level of foreign debt held by the three banks – Kaupthing, Glitnir and Landsbanki – which caused their collapse. At the end of 2007, Kaupthing recorded $86.5bn of assets, followed by Landsbanki’s $49.4bn and Glitnir with $47.7bn, according to The Banker Database. The banks took deposits not only from Iceland’s population but also from abroad, inflating the banks’ assets to more than 10 times the country’s gross domestic product (GDP) of €8.5bn.
