Well, if you have read the news lately, it is now "official": According to the interim report of the "Independent Commission on the Future of the Cyprus Banking Sector", it has been concluded that the Central Bank of Cyprus has been inadequate to oversee the banking system, to enforce the rules of the game (because in the whole money/derivatives-trading/swapping game, yes, there are rules about conduct and risk exposure that Cyprus' Banks and Central Bank were obliged to follow - and didn't) and basically that the Central Bank of Cyprus has been (and still is) a complete failure to do its job - hence partly the reason Cyprus is in the situation that it is now. Thank you, Sherlock.
Coincidentally, a year back, my MBA professor asked my team to prepare a study about what took place in Iceland - with the known results of their own financial catastrophe. It was a bit of a hot potato subject, because back then Iceland was in the situation Cyprus is now: in the aftermath, trying to figure out what had happened, there was a lot digging and discovering (and some times "discovering") taking place about what when wrong, what did not work, who is to blame etc etc.
Well, it seems we did a good job into spherically tackling the subject - after a lot of research we produced a lengthy report with lots on insight on the matter.
The eerie part of the story, is that one year later, this report rings a lot of similarities of what went wrong in Cyprus.
Of course, Cyprus' and Iceland's cases of financial catastrophe do have a lot of differences - but do bare the similarities, especially this one: It has been concluded that the Central Bank of Iceland was also in the same inadequate capacity to properly perform its supervisory and regulatory role - pretty much in the same way with the Central Bank of Cyprus.
Of course, there are many striking similarities in the cases of Cyprus and Iceland, like the sudden extreme ease of getting credit and the subsequent spending frenzy on excesses; the euphoria of the masses that as a consequence all voices of scepticism and warning were suppressed; an elite group of people (about 30 in Iceland) that "took the money and ran"... the irony and similarities go on and on - reminds you of something familiar?
But do pay attention on the issue of the Icelandic Central Bank. As we have illustrated in our report:
"In order to grasp how “big” this credit frenzy was -and how bad things had turned out- it only needs to illustrate that by the end of crisis Icelandic banks' obligations amounted 9 times Iceland's GDP: Iceland’s banks ended up owning 75 billion Euros (a foreign currency in Iceland). This amount was much greater in relation with the population size and, not surprisingly, there were no corresponding funds (neither in Euros, neither in Krona) available in Iceland’s Central Bank as a backup in case of default, which that what was eventually happened at a big scale."
Also, the Icelandic Central Bank was never prepared to work, oversee and regulate the country's economy in a financial environment of high stakes, big money and fast transactions, but most importantly with the radical changes in banking/financial institutions regulation and opening up to international financial products markets (due to the liberalization that had been recently implemented).
The bottom line is, it was a case of "shut up and enjoy the party that never ends". Well, the party did end for Iceland in a very dramatic manner: a shattered economy; a shuttered pride of a nation that boasted independence, self-sufficiency and discipline; a country with one of the highest rankings in the work for its democracy and many times on the top of "best places to live" indexes - despite all that cold! Reminding you that Cyprus was many times one of the best places to live in terms of quality of life - despite the fact that it is a war-torn country.
Again, of course, one cannot easily compare and contrast Iceland and Cyprus as countries: they are indeed too different in terms of culture, years of existence as states and governance styles. Iceland boasts the oldest continuously functioning parliament in the world -the over 500-years old "Althing"-, whereas Cyprus was -no offence- pretty much an "African-style" colony until 1960 and a truncated state (or, "state") since then. Iceland's culture was austere, disciplined with a very organized society, whereas Cyprus... well, you know. Iceland was proud about scoring the very lowest levels of corruption in its governance and state mechanism, whereas Cyprus... no comment "κουμπάρε μου που εν να μου κανονίσεις τον γιο μου στην Κυβέρνηση".
To be fair though one has to give credit to Cyprus that despite all these, it did manage to recover and thrive after a disastrous war and people worked hard to achieve one of the best standards of living in the world. I repeat, "despite all these", somehow (perhaps "with a little help from our friends"), Cyprus' people did that. And now it's gone.
Nevertheless, despite of our differences with Iceland (on one hand, Iceland seemed to have all things in place to continue being a strong and stable county and on the other hand, Cyprus had none of these things in place, resulting an any-time explosion in our faces - that eventually came), still, Cyprus and Iceland are currently pretty much in the same lake of dung.
The questions are: How could we've been so stupid to allow these things to take place - as well as letting incompetent people and crooks run the show. Will Cyprus and Iceland learn from their mistakes? About Cyprus, will justice ever be done - as they are currency trying in Iceland and have some considerable successes in penalizing individuals, politicians, civil servants and organizations for their wrongdoing? Personally, with Cyprus' state miserable record regarding the ability to bring people to justice and punish them for their crimes against their country (see how many people where eventually punished for the stock market collapse, the 1974 coup, the Mari explosion, the political assassinations and inter-communal violence of the 1960's), I really do not think the latter will ever take place.
And also, is this the fate of a country, that in its course of existence its people must go through hard times and suffer - thus carrying the suffering as lessons and improve in the future? After all, the financial geniuses of today, the Dutch (hello Mister Dijsselbloem), in order to become so wise, they also had to go through a huge financial disaster in 1637 and the "raison de la stupidité" was, believe it or not, not some fancy financial products, but the vicious tulip.
Some of these questions are too philosophical for me to deliberate upon.
Anyway, here is the report in pdf: "The Global Economic Crisis: Icelandic Saga".
Enjoy.
Coincidentally, a year back, my MBA professor asked my team to prepare a study about what took place in Iceland - with the known results of their own financial catastrophe. It was a bit of a hot potato subject, because back then Iceland was in the situation Cyprus is now: in the aftermath, trying to figure out what had happened, there was a lot digging and discovering (and some times "discovering") taking place about what when wrong, what did not work, who is to blame etc etc.
Well, it seems we did a good job into spherically tackling the subject - after a lot of research we produced a lengthy report with lots on insight on the matter.
The eerie part of the story, is that one year later, this report rings a lot of similarities of what went wrong in Cyprus.
Of course, Cyprus' and Iceland's cases of financial catastrophe do have a lot of differences - but do bare the similarities, especially this one: It has been concluded that the Central Bank of Iceland was also in the same inadequate capacity to properly perform its supervisory and regulatory role - pretty much in the same way with the Central Bank of Cyprus.
Of course, there are many striking similarities in the cases of Cyprus and Iceland, like the sudden extreme ease of getting credit and the subsequent spending frenzy on excesses; the euphoria of the masses that as a consequence all voices of scepticism and warning were suppressed; an elite group of people (about 30 in Iceland) that "took the money and ran"... the irony and similarities go on and on - reminds you of something familiar?
But do pay attention on the issue of the Icelandic Central Bank. As we have illustrated in our report:
"In order to grasp how “big” this credit frenzy was -and how bad things had turned out- it only needs to illustrate that by the end of crisis Icelandic banks' obligations amounted 9 times Iceland's GDP: Iceland’s banks ended up owning 75 billion Euros (a foreign currency in Iceland). This amount was much greater in relation with the population size and, not surprisingly, there were no corresponding funds (neither in Euros, neither in Krona) available in Iceland’s Central Bank as a backup in case of default, which that what was eventually happened at a big scale."
Also, the Icelandic Central Bank was never prepared to work, oversee and regulate the country's economy in a financial environment of high stakes, big money and fast transactions, but most importantly with the radical changes in banking/financial institutions regulation and opening up to international financial products markets (due to the liberalization that had been recently implemented).
The bottom line is, it was a case of "shut up and enjoy the party that never ends". Well, the party did end for Iceland in a very dramatic manner: a shattered economy; a shuttered pride of a nation that boasted independence, self-sufficiency and discipline; a country with one of the highest rankings in the work for its democracy and many times on the top of "best places to live" indexes - despite all that cold! Reminding you that Cyprus was many times one of the best places to live in terms of quality of life - despite the fact that it is a war-torn country.
Again, of course, one cannot easily compare and contrast Iceland and Cyprus as countries: they are indeed too different in terms of culture, years of existence as states and governance styles. Iceland boasts the oldest continuously functioning parliament in the world -the over 500-years old "Althing"-, whereas Cyprus was -no offence- pretty much an "African-style" colony until 1960 and a truncated state (or, "state") since then. Iceland's culture was austere, disciplined with a very organized society, whereas Cyprus... well, you know. Iceland was proud about scoring the very lowest levels of corruption in its governance and state mechanism, whereas Cyprus... no comment "κουμπάρε μου που εν να μου κανονίσεις τον γιο μου στην Κυβέρνηση".
To be fair though one has to give credit to Cyprus that despite all these, it did manage to recover and thrive after a disastrous war and people worked hard to achieve one of the best standards of living in the world. I repeat, "despite all these", somehow (perhaps "with a little help from our friends"), Cyprus' people did that. And now it's gone.
Nevertheless, despite of our differences with Iceland (on one hand, Iceland seemed to have all things in place to continue being a strong and stable county and on the other hand, Cyprus had none of these things in place, resulting an any-time explosion in our faces - that eventually came), still, Cyprus and Iceland are currently pretty much in the same lake of dung.
The questions are: How could we've been so stupid to allow these things to take place - as well as letting incompetent people and crooks run the show. Will Cyprus and Iceland learn from their mistakes? About Cyprus, will justice ever be done - as they are currency trying in Iceland and have some considerable successes in penalizing individuals, politicians, civil servants and organizations for their wrongdoing? Personally, with Cyprus' state miserable record regarding the ability to bring people to justice and punish them for their crimes against their country (see how many people where eventually punished for the stock market collapse, the 1974 coup, the Mari explosion, the political assassinations and inter-communal violence of the 1960's), I really do not think the latter will ever take place.
And also, is this the fate of a country, that in its course of existence its people must go through hard times and suffer - thus carrying the suffering as lessons and improve in the future? After all, the financial geniuses of today, the Dutch (hello Mister Dijsselbloem), in order to become so wise, they also had to go through a huge financial disaster in 1637 and the "raison de la stupidité" was, believe it or not, not some fancy financial products, but the vicious tulip.
Some of these questions are too philosophical for me to deliberate upon.
Anyway, here is the report in pdf: "The Global Economic Crisis: Icelandic Saga".
Enjoy.
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