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Zombie Banks: How Broken Banks and Debtor Nations are Crippling the Global Economy by YALMAN ONARAN

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Chapter 6

The Reincarnation of Iceland’s Banks

When Iceland’s authorities seized the country’s three main banks in October 2008, they struggled at first to keep things running. The banks’ creditors, depositors, banks in other countries, clearing agencies—everybody panicked. They didn’t know what it meant for a country’s whole banking system to collapse (the three accounted for 87 percent of the nation’s financial assets). “Nobody wanted to work with an Icelandic bank,” says one of the bank executives appointed by the authorities after the takeover. The overseas assets of the banks were frozen in several countries, the United Kingdom going as far as using antiterrorist laws to do so. Even though the Icelandic government had issued a guarantee ...

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