Following the global financial crisis, Iceland came down hard on its bankers. As of 2018, 25 of them — including the chief executives of leading banks — had been jailed. The approach won plaudits among some because it was seen as a way to enable the country to reform its financial sector and rebuild its economy.
But such conventional wisdom is wrong, argues Jared Bibler, the lead investigator at Icelandic regulator the Financial Supervisory Authority (FME) whose own probes culminated in sending some of these guilty bankers to jail. Now, in his recent book, Iceland’s Secret: The Untold Story of the World’s Biggest Con, he says the country’s approach has neither cleaned out the Augean stables of Icelandic finance nor slain “the dragon of deeply corrupt financial markets”.
The Icelandic banking crisis, which came a few weeks after Lehman Brothers filed for bankruptcy on September 15 2008, was more extreme and longer-lasting than those endured almost anywhere else. This was partly because the country’s three largest banks — Kaupthing, Landsbanki and Glitnir — had been allowed to swell their balance sheets to gargantuan proportions. Their assets were 11 times the country’s gross domestic product at the time of their collapse, making bailouts all but impossible.