The motivation for this book was provided by the countless individuals who have attended lectures given by the author at central banks and other financial institutions around the world, as well as at universities, from 2010 to 2012. The lectures were based on the findings of the Icelandic Parliament's Special Investigation Commission (SIC), and the commission's roughly 48 employees and contractors who completed the work in only 15 months. They managed to sift through millions of pieces of data, resulting in extraordinary lessons for us all, including for those who were the main culprits.

The case of Iceland's financial boom and bust isn't just unique due to its extremes, but also due to the extensive autopsy performed post-crisis by the Special Investigation Commission using its unique data privileges. The lessons are many and the data often speaks clearly how we can avoid such an extreme episode in the future, but most of the findings were only published in Icelandic in the SIC's 2400+ page report. A condensed English version was therefore necessary.

Reykjavik, Iceland

Reykjavik, Iceland


The book is organized into four parts.  Part 1 (chapters 1-4), "From Prosperity to Panic", covers the introduction, a background and context, the days and weeks prior to the collapse, and an introduction to Iceland's Special Investigation Commission.

Central Bank of Iceland, seen through the glass facade of the Harpa concert and conference center.

Central Bank of Iceland, seen through the glass facade of the Harpa concert and conference center.

Part 2 (chapters 5-9), "How Did the Bankers Do it?", covers the process of financial liberalization, the funding of the banks, the Geysir Crisis (aka Geyser Crisis), the Central Bank's so-called Love Letters, and tricks played on the European Central Bank.

Part 3 (chapters 10-13), "Why Did the Bankers Do it?", covers the web of ownership, related-party lending, market manipulation, and flawed incentive systems.

And finally, Part 4 (chapters 14-17), "Why Didn't Anybody Stop the Bankers?", covers  the online deposit funding efforts by the banks, the desperate actions of the Central Bank of Iceland, the Icelandic Financial Supervisory Authority (FME), and the concluding remarks.


The following statements are some of the endorsements and comments received by the author.

This book delivers an urgent warning about the critical importance of controlling risk and incentives in banking. If those who benefit from risk don’t bear more downside, they are likely to become reckless. When regulation and supervision fail, economies can come down, inflicting suffering on many. Iceland was extreme and the details are shocking, but similar dangers lurk everywhere, and we must tend to them before too late.
— Anat Admati, Professor of Finance and Economics at Stanford Graduate School of Business and coauthor of The Bankers' New Clothes: What's Wrong with Banking and What to Do About It.
Iceland was the most extreme example of a boom and bust in the international financial crisis that started in 2007. This book provides an excellent account of what exactly happened. It should be read by all those interested in the crisis, including scholars as well as practitioners.
— Franklin Allen, Nippon Life Professor of Finance and Professor of Economics, The Wharton School of the University of Pennsylvania.
Iceland was the proverbial canary. When its financial system collapsed it was a clear sign there was something very wrong not only in Iceland but in the world financial system as a whole. This book provides an inside view of the story of the Icelandic collapse, with strong analytic insights and a rare inside perspective. It is an important contribution to our understanding of the international financial system in the first decade of the century.
— Charles Enoch, Deputy Director of the Monetary and Capital Markets Department, International Monetary Fund (IMF), Washington D.C., USA.
A fascinating and nuanced account of the implosion of the Icelandic banking system in the Fall of 2008, drawing on official investigations and primary sources not previously available to outside scholars and policy-makers.
— Howell E. Jackson, James S. Reid, Jr., Professor of Law, Harvard Law School.
This is a book that had to be written. The story of the rise and fall of the Icelandic banking system is not only of interest to Icelanders, it contains many important lessons for the global community. Although most of the mistakes made in Iceland may not have been unique, more or less everything that could go wrong did. The book should be required reading for anyone involved in banking or regulation.
— Gylfi Magnússon, Associate Professor of Finance at the University of Iceland and Minister of Economic Affairs in 2009-2010.
Johnsen had a unique view into the Icelandic crisis, and has written a terrific book that is a must-read for anyone trying to understand what happened there.
— Andrew Metrick, Michael H. Jordan Professor of Finance and Management Yale School of Management.
This book provides a detailed, clear and refreshingly candid account of the Icelandic financial crisis. It will be a useful reference with valuable lessons for policy makers...and a sober reminder to strengthen financial supervision during times of strong credit growth.
— Ceyla Pazarbasioglu, Deputy Director in the Monetary and Capital Markets Department at the IMF, and former Vice President of the Banking Regulation and Supervision Agency of Turkey.
Gudrun Johnsen presents an authoritative account of Iceland’s financial debacle, based on the findings of Iceland’s Special Investigation Commission. This intuitive and perceptive writing on the findings is both engaging and exciting. No future writer on this episode will be able to ignore Johnsen’s account.
— Gylfi Zoega, Professor of Economics at the University of Iceland, and co-author of Preludes to the Icelandic Financial Crisis.