Question

the 2008 Financial crisis was a shock to yhe system. whether you think banks should be too big to fail. What iceland did when their banks failed. should we have done that?

Answer 1

It began in 2007 with the crisis in sub-prime mortgage in united states and developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008. Excess risk taking and using of customizes derivatives led to the collapse of famous bank Lehman Brothers.

The 2008 global financial crisis hit Iceland hard. The currency crashed, unemployment soared and the stock market was more or less wiped out.

But unlike other Western economies, the Icelandic government let its three major banks - Kaupthing, Glitnir and Landsbankinn - fail and went after reckless bankers. Many senior executives have been jailed and the country's ex-prime minister Geir Haarde was also put on trial, becoming the first world leader to face criminal prosecution arising from the turmoil. although he was subsequently cleared of negligence.

Thus strict regulations to be enacted to curb the ill practices of the banks and regulate the risk taking through legislative norms.