Iceland’s stock exchange suffered the 2008 collapse known as the Icelandic financial crisis.
Iceland’s banking system expanded dramatically in the years before 2008, with major banks building assets far larger than the country’s economy. When global credit markets froze, the banks could not refinance their foreign obligations. Glitnir, Landsbanki, and Kaupthing were placed into receivership in October 2008.
The crisis also hit the Iceland Stock Exchange. Trading was suspended for several days in October, and the exchange’s main index plunged when trading resumed. The banking collapse led to a sharp fall in the Icelandic króna, inflation, recession, and political upheaval.
Iceland’s experience differed from that of countries that mainly rescued large domestic banks. The old banks were wound down or restructured, while new domestic banks were established. The International Monetary Fund approved a stabilization program for Iceland in 2008. The crisis is therefore a national banking and currency crisis as well as a stock-market crash.