•  There was early sale of “good” assets at fire sale prices, which will lead to lower recovery ratio for bond holders. 6  A report by Tryggvi Thór Herbertsson and Frederic Mishkin was particularly influential in this regard. See Mishkin, Frederic S., and Tryggvi T. Herbertsson, (2006). Financial stability in Iceland, Iceland Chamber of Commerce. (http://www.vi.is/files/555877819Financial%20Stability%20in%20Iceland%20Screen%20Version.pdf). BIS Review 9/2010  7  •  UK authorities froze and ring-fenced assets. •  Further research will throw light on the UK decision to close Singer & Friedlander, which brought down Kaupthing – however, a lender of last resort (LOLR) loan in Sweden. •  A consequence of all of this is the dispute with UK and Dutch authorities over the settlement of deposit insurance claims related to Landsbanki branches. This problem is still negatively affecting the economic resurrection of Iceland. It is a big topic in its own right, but I am not going to say more about it here, as involves international relations, European legal issues, and balance of payments and debt sustainability issues, and as such, is far beyond the scope of my topic today. Bank resolution on the Icelandic side has been somewhat more orderly. It was shaped by the initial goal of securing continued banking operations in the country. First, we have the Emergency Act of 6 October 2008, under which the FME acquired broad-based intervention rights; deposits were assigned higher priority than other unsecured claims; and government capital injections received parliamentary approval.
10  BIS Review 9/2010  •  Key proposals (e.g., the De Larosière and Turner reports) 11 do not go far enough and do not measure up to the Icelandic experience (wrongly seen as primarily a supervisory failure, which it was only in part). •  Do we need a system of FX swap lines or an FX liquidity pool to provide insurance against a run on cross-border banking (as we have domestically through central bank liquidity provisions and LOLR)? •  The crisis showed that, when all is said and done, “banks are international in life, but national in death!” 12 Will reforms change this, or will we regress? The question remains open. Concluding remarks I told you in the beginning that this is a complex saga with many twists. I have only covered a small part of it. However, be sure that there is more to come. I am currently reading a newly published biography of Snorri Sturluson. 13 He and other Icelanders wrote about events that occurred here in Norway and Iceland, in some cases more than two centuries earlier. We might thus be writing about the Icelandic financial crisis for centuries as well! If history is any judge, then we are probably better at it than we were this time at managing, regulating and supervising a cross-border banking system. For the sake of all of us, let us at least hope so. Thank you very much. 11  De Larosiére, Jacques (chair), (2009).