do we need a system of fx swap lines or an fx liquidity pool to provide insurance against a run on cross - border banking ( as we have domestically through central bank liquidity provisions and lolr )? • the crisis showed that, when all is said and done, “ banks are international in life, but national in death! ” 12 will reforms change this, or will we regress? the question remains open. concluding remarks i told you in the beginning that this is a complex saga with many twists. i have only covered a small part of it. however, be sure that there is more to come. i am currently reading a newly published biography of snorri sturluson. 13 he and other icelanders wrote about events that occurred here in norway and iceland, in some cases more than two centuries earlier. we might thus be writing about the icelandic financial crisis for centuries as well! if history is any judge, then we are probably better at it than we were this time at managing, regulating and supervising a cross - border banking system. for the sake of all of us, let us at least hope so. thank you very much. de larosiere, jacques ( chair ), ( 2009 ). the high - level group on financial supervision in the eu, brussels, 25 february 2009. financial services authority, ( 2009 ). the turner review : a regulatory response to the global banking crisis, march 2009 this apt phrase is attributed to mervin king, the governor of the bank of england. gudmundsson, oskar ( 2009 ). snorri – ævisaga snorra sturlusonar 1179 – 1241 ( e. snorri – the biography of snorri sturluson 1179 – 1241 ). forlagið – jpv utgafa, isbn - 13 : 978 - 9935 - 11 - 074 - 9.

to respond by matching it with an investment of its own on the same scale. the inflow of capital was enormous. as if this was not enough, public sector involvement in housing finance was reformed around the same time ; this structural reorganisation had unexpected multiplier effects when the recently privatised commercial banks eagerly followed that lead and ran ahead along the same path even faster than the policy makers had expected. at the same time, icelandic banks and financial institutions have been establishing their influence in neighbouring foreign markets and, to some degree, more distant ones. the banks have expanded rapidly and are now very large relative to iceland ’ s domestic economy, and in fact by any measure. their international activities have also created a new situation that has sometimes been called “ the problem of explaining the icelandic economy ”. although i feel that this problem is overstated because it must surely be temporary, it cannot be denied that the icelandic currency itself, and its small size, are recurrent themes. the economic factors i mentioned earlier have driven strong inflationary pressures in iceland, which have partly appeared in the form of higher measured inflation, but have to some extent been contained by central bank policy rate decisions, which in turn have affected the exchange rate of the icelandic krona, at least for some while now. and in combination, these two factors have raised yet another question that is relevant to this conference. that is to say, these special conditions have inspired new investors, the carry traders, to venture to our shores. these modern - day vikings try their fortune in distant places in the hope of quick gain and handsome returns, which they can no longer find closer to home. what will happen when these bold hunters of yields and expectations suddenly lose their nerve? or their appetite? regardless of whether this is caused by events that have occurred somewhere else and under completely different conditions from here, or due to persistent rumours, speculation and theories about the situation in iceland and risks that have little or no foundation at that time. will they load everything aboard and sail off, like the vikings in the past, with what they have managed to gather up, and look for shelter with their bounty against real or imaginary threats? if this happens, might the high - yield countries suffer a shock? and if so, will that shock be felt the most by the smallest countries, where investors naturally have the least knowledge and confidence? then the question will arise about the impact that all this will have on the effectiveness of the central bank ’ s policies for controlling