A recent investigation report on the truth of Iceland's financial crisis has caused waves in Icelandic society as much as the recent volcanic eruption. The report hit the nail on the head and pointed out that the former prime minister, relevant ministers and central bank governors should all be responsible for the collapse of the national financial system. Under pressure, Buyonggofson, the former major shareholder of the National Bank of Iceland, apologized to the whole society for the first time for his performance in the financial crisis. This report, which lasted for more than a year, not only showed people the deep reasons of the Icelandic crisis, but also brought profound enlightenment to the world.
10 years ago, Iceland still relied on fisheries as its main economic pillar. However, under the background of the rapid expansion of the financial industry in Britain and the United States, "financial establishment" has become Iceland's choice. The financial industry has penetrated into every economic cell in Iceland, and the concept of liberalism has caused many strange phenomena.
Paradoxically, the whole society has joined the financial expansion. Iceland's domestic financial market is small, but banks are keen to expand their international business. Iceland's banking industry, represented by Cuyp Shining Bank, National Bank of Iceland and Park Jung Sunil Bank, uses its high interest rate and relaxed financial supervision environment to absorb overseas capital and then lend to foreign customers. Since 2004, due to the abundant liquidity of the global capital market, the foreign-related loans of Icelandic banks have increased at an annual rate of 50%, which has greatly promoted the economic development of Iceland. However, as the report says, when a country's financial assets are nine times the GDP, all the rules are useless, so that when the liquidity of the global capital market generally tightened in 2007, Icelandic banks accelerated their foreign lending.
Strangely, the major shareholder is also the biggest lender of the bank. From 2007 to 2008,13 of the funds lent by the three major banks in Iceland flowed to customers who were unable to pay their debts, and most of these customers were major shareholders of the three major banks. As a big consortium in Iceland, they control the bank on the one hand, and are the biggest lenders of the bank on the other. Among them, when Cuyp Xin Bank went bankrupt, Bogur Group, its largest shareholder, still had a loan of 250 billion Icelandic krona (1 USD 128.2 Icelandic krona), equivalent to 70% of the bank's total assets.
Strange phenomenon 3: bank shareholders borrow money to speculate on their own stocks. The report pointed out that in the absence of effective supervision, the mutual shareholding and illegal operation of banks and their major shareholders are the main drivers of the Icelandic crisis. The bank's major shareholders also used the borrowed money to speculate on their own bank shares.
Strange phenomenon 4: Financial supervision institutions exist in name only. Iceland has developed information technology, but its financial supervision committee is one of the worst government agencies in Iceland. The agency has neither a software platform to process a large amount of financial information, nor a server and engineers, so it can't track and process a large amount of information in the financial industry in time.
The survey report shows that the Icelandic government lacks minimum vigilance against financial risks. As early as the beginning of 2006, there were many signs that Iceland was about to face a financial crisis, but the government was indifferent. By 2008, the Bank of Iceland realized the seriousness of the financial problem, but did not submit a formal report to the government.
The accumulation of systemic risks is the root cause of Iceland's bankruptcy. Sigfsson, the leader of Iceland's Green Party, hit the nail on the head: "It is the concept of free and unregulated import finance that hijacked Iceland's economy." "The banking system failed, the regulatory system failed, and even the concept of free market failed." This investigation report with painful truth has made Icelanders know themselves more clearly, and the problems revealed in it should serve as a warning for Iceland and even the relevant countries in the world in the reconstruction of the financial system.
From June 5438 to October 2008 10, a serious financial crisis broke out in Iceland, and the country was on the verge of bankruptcy. (same as above)
The lessons and enlightenment of the Icelandic crisis are very profound.
First of all, banks do not do what they can when expanding overseas business. Iceland is a small island country with a limited market size, which restricts the further development of the banking industry. Therefore, after the completion of bank privatization in 2000, the government encouraged the banking industry to expand into the international market. In just a few years, the international business of Iceland's banking industry has achieved such rapid development, which is undoubtedly lacking in sustainability. Some people think that even without the turmoil in the international capital market, Iceland will encounter a crisis. In an interview with the media, former Icelandic Prime Minister Hald once said earnestly: "The lesson we have learned from the events of the past few years is that it is unwise for a small country to try to play a leading role in the international banking industry."
Secondly, the government can't relax the supervision of the financial industry. While the banking industry continues to expand its domestic and foreign markets, the Icelandic government has failed to effectively supervise it. When analyzing the crisis in Iceland, the Financial Times said: "The central bank only used interest rates to supervise and reduce the reserve requirements, and did not use moral suggestions to regulate the behavior of banks."
In order to accelerate the development of the financial industry, the government of Odson, who believes in neoliberalism, failed to guide and supervise the unlimited expansion of the financial industry, resulting in heavy debts of banks and inability to cope with adverse changes in external conditions. Iceland's misfortune once again shows that the government must strengthen the supervision of the financial industry. An article on the website of CNN said that Iceland is like Lehman Brothers, and everyone knows that this is a huge bubble. However, for political expediency, the Icelandic government allowed the bubble to expand until it burst.
Third, we cannot rely on credit expansion to stimulate the economy. After studying the banking crisis in Latin American countries, the economists of the Inter-American Development Bank found that every banking crisis in Latin America was caused by the unlimited expansion of credit, because the excessive expansion of credit would destroy the macroeconomic fundamentals and amplify the fragility of the financial system. Therefore, they come to the conclusion that the "good times" accompanied by credit expansion also mean that the "bad times" are coming. Iceland's experience seems to confirm this conclusion. After obtaining a large amount of international funds, Icelandic banks provide mortgage loans denominated in foreign currencies to their residents. As a result, the ratio of household debt to disposable income in Iceland rose from 160% in 2000 to 240% in 2006.
Fourth, correctly handle the relationship between giving play to comparative advantages and upgrading industrial structure. Any country must give full play to its comparative advantages when developing its economy. Iceland's comparative advantage is its rich fishery resources. The fishery sector has made great contributions to Iceland's economic development, but Iceland has been competing with some neighboring countries for fishery resources. In addition, it is difficult for fisheries to make the national economy take off. Therefore, the Icelandic government has been pursuing diversification of industrial structure to reduce its dependence on fisheries.
Needless to say, Iceland's efforts in this regard have achieved initial results. The Icelandic government believes that in order to achieve faster development, in addition to expanding high-tech industries, we must also vigorously develop the international financial industry. In the era of financial globalization, the international financial industry seems to be a shortcut to improve the economic growth rate. ...