{"title":"Chapter 9: Have Icelanders Learned Their Lesson? The Investigation of the Icelandic Collapse and its Aftermath","authors":"V. Árnason","doi":"10.1108/978-1-78743-347-220181013","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181013","url":null,"abstract":"After the financial collapse, the Icelandic Parliament set up a Special Investigation Commission to explain the causes of the events. A working group on ethics evaluated the explanations of the commission from a moral perspective and placed its analyses in the wider social context. This chapter delineates the approach and the main findings of these investigations. The author argues that the main lessons to be learned are about the need to strengthen democratic structures and professional practices in business, politics and administration. The implications of this structural approach for assessing the responsibility for the collapse are discussed in the light of I.M. Young’s social connection model. While the parliamentary reports were well received, three events hindered Icelanders in learning the reports’ main lessons. In addition to a volcanic eruption immediately after the publication of the report, two major political debates led the reconstruction work astray. The first was about the case of the former prime minister and the second was the fierce Icesave dispute about whether Icelanders should share the financial burden with the citizens of the United Kingdom and the Netherlands who lost their savings in the Icesave accounts. This issue dominated Icelandic public discourse for three years and diverted political attention from the message of the parliamentary reports – namely, that the main explanatory factors for the financial collapse were weak governance and flawed practices within Iceland. As a consequence, the political sector has lagged behind other social sectors in efforts to learn lessons from the financial collapse.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"62 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129365425","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Prelims","authors":"","doi":"10.1108/978-1-78743-347-220181020","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181020","url":null,"abstract":"","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133290012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 3: Public Trust in Institutions in Pre- and Post-Crisis Iceland (I): Take the Lift Down, But Use the Stairs Up","authors":"Gudrun Johnsen, S. Sigurgeirsdóttir","doi":"10.1108/978-1-78743-347-220181004","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181004","url":null,"abstract":"Abstract \u0000Trust is considered instrumental for economic growth, successful operation of public institutions and social cohesion. We explore how public trust in Icelandic institutions has developed during the recent tumultous financial times, including the failure of the Icelandic banking sector. Using data from Gallup-Iceland’s annual survey of individuals’ trust in institutions, we show that trust in general, and particularly towards political and financial institutions, evaporates following the crisis year of 2008. Although trust varies significantly among different demographic groups, the trend shows how the road to recovering trust in Icelandic institutions post-crisis has proven to be challenging and drawn-out. Apart from law-enforcement agencies, which were relatively unscathed by the financial calamities, no institution has managed to escape the drop in trust, nor have they re-established the pre-crisis level of trust in the minds of the public nearly a decade after the crisis. A notable personal post-crisis exception is the recently elected President of Iceland who has managed to improve trust in his office by the highest margin of all 15 public offices and institutions examined.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"367 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132742945","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 10: Trust and Financial Services: The Impact of Increasing Digitalisation and the Financial Crisis","authors":"A. Oehler, Stefan Wendt","doi":"10.1108/978-1-78743-347-220181014","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181014","url":null,"abstract":"Abstract \u0000Current trends in financial services are characterised by two intertwined developments. First, increasing digitalisation provides opportunities to invest or raise money through channels that have not been available with more traditional financial services. Crowd-investing and social-trading platforms act as new intermediaries. Similarly, automated advice (robo-advice) is attracting increased attention. Second, the financial crisis of 2007–2010 is associated with a considerable decline in trust in financial institutions, even more so in Iceland, which had experienced a complete collapse of its banking system. Despite the evaporation of trust in their banking system, Icelandic consumers were largely bound to use Icelandic financial institutions because capital controls were in place since the financial crisis until 2017, which limited investors’ opportunities to, for example, diversify their portfolios internationally. As financial decisions are inherently risky and since financial services have the characteristics of credence goods, those who wish to use financial services need to trust financial intermediaries or the immediate contractual partner. The purpose of this chapter is to examine the role of trust in the context of increased digitalisation, and to discuss steps to establish trust in digitalised financial services. Among other items, we discuss the information requirements accompanying financial products and financial institutions, data protection and liability in the context of emerging digitalisation. Our work holds implications for individuals, financial service providers, policy makers and supervisory authorities.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120847451","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Audur Arna Arnardottir, Throstur Olaf Sigurjonsson
{"title":"Chapter 12: Restoring Trust Through Improved Corporate Governance and Adherence to Gender Quotas","authors":"Audur Arna Arnardottir, Throstur Olaf Sigurjonsson","doi":"10.1108/978-1-78743-347-220181017","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181017","url":null,"abstract":"Abstract \u0000According to some key actors in Iceland’s financial sector, in the wake of the financial crisis, Icelandic financial institutions consciously tried to build trust and a positive new image through, among other things, the visible presence of women on their corporate boards and management teams. By strict adherence to gender quota legislation and through improved corporate governance practices and much stricter control and monitoring, the financial sector sent signals of change to various stakeholders. Now 10 years on, the re-establishment of trust is still a work in progress.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123544426","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Index","authors":"","doi":"10.1108/978-1-78743-347-220181019","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181019","url":null,"abstract":"","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128234323","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 5: ‘Not Just Crying About the Money’: Iceland and Globalisation During Boom and Crisis","authors":"Kristín Loftsdóttir, M. Mixa","doi":"10.1108/978-1-78743-347-220181006","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181006","url":null,"abstract":"Abstract \u0000The enormous financial losses during the economic crash in Iceland led to widespread anxieties, coupled with a deep sense of shared national disaster and moral collapse (Bernburg, 2015; Olafsson, 2014). The strong sense of betrayal indicates how economic processes are not only about economic prosperity, but are embedded also in wider societal discourses and a sense of national identity (Schwegler, 2009). We use perspectives from anthropology and cultural economics to ask how the lack of trust by the Icelandic population after the crash signals both a different way of visualising Iceland’s role within an increasingly global world and a changing sense of Icelanders as national subjects standing unified against foreigners. Iceland’s neo-liberalisation inserted the country into global institutions and processes with the faith that these processes would automatically be beneficial to Iceland. Furthermore, the sense of some kind of a unified Icelandic subject was manifested in the image of the ‘Business Viking’, which was seen as embodying the interest of the Icelandic nation as a whole. Following the economic crash, the betrayal of trust involved disrupting the idea of the ‘oneness’ of Iceland and thus, the sharp distinction between ‘us’ Icelanders and ‘those’ foreigners. In our discussion, we trace different ways of conceptualising this sense of Icelanders as a unified entity, asking what this notion means in terms of trust. Our research shows how the sense of ‘unified Icelanders’ was instrumental in creating the feeling of trust, and how it is possible to manipulate and appropriate that trust.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117238468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 1: Restoring Confidence in the Aftermath of Iceland’s Financial Crisis","authors":"G. Zoega","doi":"10.1108/978-1-78743-347-220181001","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181001","url":null,"abstract":"Abstract \u0000Following the collapse of the banking system in October 2008, the Icelandic authorities attempted to restore confidence in the country’s institutions, improve their functioning and gradually improve the country’s credit rating. The authorities took ownership of an International Monetary Fund-sponsored economic programme that managed to turn the macroeconomic development around when, following a trough in the summer of 2010, an economic expansion started that has continued ever since. They applied for membership in the European Union in order to show their commitment to be part of the international economic community and to have a lender of last resort in the European Central Bank in future crises. The causes of the collapse were investigated and many bankers were prosecuted. Finally, financial regulations were made stricter and the structures of the Central Bank and the supervisory authority were changed for the better. The net effect was to lower the credit default swap rate on the government’s debt, gain access to capital markets and make the Iceland story one of resurrection rather than only hubris and collapse.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"94 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130196343","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 11: Post-Crisis Regulation and Supervision of Icelandic Banks","authors":"Jon Thor Sturluson","doi":"10.1108/978-1-78743-347-220181016","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181016","url":null,"abstract":"Abstract \u0000Since the financial crisis of 2008, legislation and rules affecting the financial market in Iceland have been strengthened considerably. Tougher capital requirements, detailed and frequent reporting, more thorough fit-and-proper tests, barriers to connected lending and strict limits on bonus payments are but a few examples. Similarly, the supervision of banks has been upgraded markedly. It is now much more intrusive and forward-looking than before, that is, it is more focused on governance and the business model. Many of these reforms are based on international initiatives, such as the Basel III standard, while others are particular to Iceland. The main objective of these reforms is to strengthen the resilience of the banking sector and limit the negative effects on consumers of harmful enterprise incentives. Trust in the financial system collapsed as a consequence of the crisis but is recovering only slowly. This apparent lack of confidence is reflected only to a limited extent in firms’ and households’ willingness to seek banking services. This raises the questions of how to appropriately measure trust, and what factors influence it. Iceland may turn out to be an interesting natural experiment in this respect. It has a unique record of prosecuting and sentencing bankers for offences that are hardly worthy of administrative fines in some other countries – but whether strict accountability is the recipe for rebuilding trust remains to be seen.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114776235","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Chapter 6: Restoring Trust in Iceland: Iceland’s IMF Programme","authors":"F. M. Baldursson, R. Portes","doi":"10.1108/978-1-78743-347-220181008","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181008","url":null,"abstract":"During the banking crisis of October 2008, Iceland became the first developed country in decades to seek the assistance of the International Monetary Fund (IMF). Iceland’s IMF programme provided a measure of stability at a time of intense turbulence. The IMF’s credibility was helpful during this period of collapse not just of the banks but also of the public trust towards almost all Icelandic institutions. Importantly, the IMF implicitly supported Iceland’s policy of letting institutional creditors of the banks rather than Icelandic taxpayers bear the costs of their collapse; this provided credibility for the policy and limited repercussions. In a reversal of previous IMF policy, capital controls were imposed. The controls helped stabilise the exchange rate, and inflation subsided. The controls also helped recovery after the crisis by shielding the economy from international financial shocks. The direct fiscal cost of the Icelandic crisis was very high, but the considerable and painful fiscal tightening that was a part of the programme was needed to avoid a sovereign debt crisis. This helped in regaining trust from international markets. Mistakes were made in the design and implementation of the IMF programme, but overall, we judge that its contribution was positive. The programme provided one of the elements for restoring trust in Iceland when it was most needed, both domestically and internationally, during the depth of the crisis in 2009–2010.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128421586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}