Ireland and Iceland in Crisis D: Similarities and Differences

Yale Program on Financial Stability Case Study 2014-4D-V1

11 Pages Posted: 20 Mar 2015

See all articles by Arwin G Zeissler

Arwin G Zeissler

Yale University - Yale Program on Financial Stability

Daisuke Ikeda

Bank of Japan; Bank of England

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: December 1, 2014

Abstract

On September 29, 2008 - two weeks after the collapse of Lehman Brothers, the government of Ireland took the bold step of guaranteeing almost all liabilities of the country’s major banks. The total amount guaranteed by the government was more than double Ireland’s gross domestic product, but none of the banks were immediately nationalized. The Icelandic banking system also collapsed in 2008, just one week after the Irish government issued its comprehensive guarantee. In contrast to the Irish response, the Icelandic government did not guarantee all bank debt. Instead, the Icelandic government controversially split each of the three major banks into a new bank that was solvent and held all domestic assets and deposits, and an old bank that retained everything else and was placed into bankruptcy. Given the different responses of the Irish and Icelandic governments to the crisis and the different economic adjustment options afforded by the currency regimes of each country, economists have looked at Ireland and Iceland to study possible responses to other financial crises.

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

Zeissler, Arwin G and Ikeda, Daisuke and Metrick, Andrew, Ireland and Iceland in Crisis D: Similarities and Differences (December 1, 2014). Yale Program on Financial Stability Case Study 2014-4D-V1. Available at SSRN: https://ssrn.com/abstract=2579081 or http://dx.doi.org/10.2139/ssrn.2579081

Arwin G Zeissler

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Daisuke Ikeda

Bank of Japan ( email )

2-1-1, Hongoku-cho
Nihonbashi
Chuo-ku, Tokyo, 103-8660
Japan

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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