Statistics give a picture of rapid-fire growth over a very short period (see graph). From 2003 to 2007, the banks’ total assets grew from less than two times Iceland’s GDP to almost nine times. Right before their collapse, total assets amounted to eleven times GDP. Over 40% of total assets were in foreign subsidiaries, 60% of total lending was to non-residents, and 60% of income was from foreign sources. Over two-thirds of lending and over three-quarters of deposits were denominated in foreign currency, notably in pounds sterling. Around 85% of the banks’ foreign lending was in Europe, with half in the Nordic countries, a third in the United Kingdom, and a tenth in the Benelux countries. Currency composition of deposits 2007  Banks' balance sheet expansion and leverage % of GDP  Total assets/Equity  1000  18  Other; 14% ISK; 22%  900 17  800 700  16  600 500  15  400 14  300 200  13  100  EUR; 16%  GBP; 45% USD; 3%  0  12 2003  2004  2005  Total assets (left axis)  2006  2007  2008  Leverage ratio (right axis)  Consolidated accounts of three largest commercial banks. 2008 data is end‐June. Deposits to customers. From the largest commercial banks' consolidated accounts. Source: Central Bank of Iceland. Source: Commercial banks' annual reports, Central Bank of Iceland.
I trust that in taking part in the competition you have been able to find out more about what we do at the ECB, why we do it, and how our monetary policy works. It seems obvious that you should know what we do at the ECB or what people do in their national central banks. But as a matter of fact, if you do polls, you would be surprised by the amount of confusion that people have. For example, lots of people, about one-third, think that central banks are like other banks, that they are by and large not very different from what other banks do. Now, you will be the selected category that will know that the ECB is a central bank and that central banks are different from banks. And even more importantly, through this exercise, you actually got to have, at a very young age, a European perspective. You understood what is still really missing from lots of people, who still think in terms of national borders. It is very important, of course, but it is not the only reality that we are living through. In fact, the European perspective becomes much more important as time passes. Why is that? Well, because there are many challenges that are in fact supranational by their very nature. That is to say, you can’t really respond to these challenges, and you can’t really address the problems at national level if they are supranational.