What Did the Icelandic Bankers Do Wrong? Results from the Supreme Court Convictions and Its Aftermath

Under the overall theme of the SASE conference in 2016, of Moral economies and economic moralities, this paper tries to fit recent practical results under the sub-theme of Varieties of financial regulation within the Accounting Economics and Law network.

The Icelandic banking system collapsed from its own overweight in 2008 when it was 8-10 times GDP and almost took down the whole country and its nation with it in the fall. Currently a new banking system of fractional size is operating within the country and doing almost no operations outside its capital border controls. 

After the collapse a big parliamentary investigation resulted in 3000 page report trying to explain the causes of the banking collapse. A special prosecutor office of over 100 staff was also put in place and closed down. The court-cases are coming to an end one by one with not may remaining. Some cases are being processed from the lower courts to the Supreme Court, while several have been finalized and bankers are sitting in jail.

This paper investigates the overall approach of the court cases and the convictions in relations to financial regulation. The national legislation draws on the European tradition and some transnational comparisons are tried.

Final section of the paper looks at how international regulatory frameworks can be seen, specially their post-crisis changes, with respect to what went wrong in Iceland. Then the moral aspect is used to interpret the public feedback given by the bankers that have been providing their views in TV talks from the prison. Was the regulatory environment to blame? 

The paper is a work in progress and not expected to be finalized until full overview of all the court cases can been retrieved from the Supreme Court but preparatory and analysis work is started now with the available results.