Banking on Power: Political Capitalism and Institutional Fragility in Iceland's Banking System, 1885–2025 (Enterprise & Society)

Summary

• Government emergency funds equalled nearly 20 percent of GDP, and debt-to-GDP rose from about 38 percent in January 2008 to over 80 percent by year-end.p.17
• As late as the 1960s, five of the sixty members of the Alþingi simultaneously managed the country's major banks.p.5
• The government agreed to sell its 45.8 percent stake in Landsbanki to Samson Holding.p.8
• The 2021 Íslandsbanki IPO sold 35 percent at ISK 79 per share (ISK 55.3 billion), attracting roughly 24,000 shareholders and leaving the state with 65 percent.p.21
• The 2022 offering sold 22.5 percent (450 million shares) to 207 investors at ISK 117 per share (ISK 52.7 billion), reducing the state's stake to 42.5 percent.p.21
• In June 2023 the Financial Supervisory Authority imposed an administrative fine of ISK 1.16 billion on Íslandsbanki.p.22

Key insights

1. Liberalization and privatization did not depoliticize finance but moved political influence into ownership structures, board appointments and credit relations.p.1
2. Landsbanki's lending to Björgólfur Guðmundsson's group peaked over €900 million, about 30–35 percent of its capital.p.14
3. At Kaupthing the CEO earned nearly 159 times the average wage.p.15
4. At the collapse the three major banks had liabilities nearly nine times GDP and there was no external lender of last resort.p.16
5. The Special Investigation Commission published a 2,000-page report, but implementation of its recommendations was at best partial.p.18
6. The National Audit Office found that the March 2022 sale did not meet expected standards of administrative practice, and further sales were paused.p.22
7. The 2025 divestment followed a framework designed to reduce insider allocation, showing that sustained external accountability can constrain political capitalism.p.23