fjárhagskrísuna

Fjárhagskrísan refers to the severe financial and economic crisis that Iceland experienced in late 2008. The crisis was characterized by the collapse of the country's three largest banks: Kaupthing, Landsbanki, and Glitnir. These banks had grown significantly in a short period, largely through aggressive borrowing and high leverage, leading to a substantial overestimation of their value relative to Iceland's economic capacity.

The rapid expansion of the banking sector meant that the banks' assets and liabilities became many times larger than Iceland's Gross Domestic Product. When global credit markets seized up following the Lehman Brothers bankruptcy, these Icelandic banks, heavily reliant on foreign funding, were unable to refinance their debts. This triggered a domino effect, leading to a sharp depreciation of the Icelandic króna and a significant stock market crash.

In response, the Icelandic government took drastic measures. It nationalized the three main banks, introduced capital controls to prevent money from leaving the country, and sought assistance from the International Monetary Fund (IMF). The crisis led to widespread unemployment, a decline in living standards, and significant public dissatisfaction. However, with the imposition of capital controls and a restructuring of the economy, Iceland gradually recovered, with its tourism sector playing a significant role in the rebound. The fjárhagskrísan serves as a notable case study in the risks associated with rapid financial deregulation and unchecked banking expansion.