The role of reserves in Iceland’s post-crisis recovery

The global financial crisis was a near-catastrophic economic event for Iceland. In October 2008, the entire Icelandic banking system, which consisted of three major banks, collapsed over a period of a few days, with additional minor institutions collapsing over the ensuing months. Around the turn of the century, privatisation of government-owned financial institutions had released a wave of aggressive growth and lending fuelled by a glut of liquidity in the global financial markets. By the time the crisis struck, the assets of Icelandic banks exceeded Iceland’s GDP ten times over. With