mar guðmundsson : iceland ’ s crisis and recovery and current challenges speech by mr mar guðmundsson, governor of the central bank of iceland, at a conference, organised by the french - icelandic chamber of commerce ; paris, 28 february 2013. * * * president of iceland, ambassadors, ladies and gentlemen nearly all of you probably know that almost 90 % of iceland ’ s banking sector failed in the first week of october 2008. this fact is well established in the minds of scholars of the international financial crisis. what is probably less well known is that at that point, iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005 – 2007 and a currency crisis in the first half of 2008. the banking collapse and the associated wealth loss and further currency depreciation made the recession worse, of course, but so did the recession that hit the global economy in the fourth quarter of 2008. that autumn, two separate but interrelated sub - stories of the recent icelandic saga converged in a tragic grand finale. these are : 1. iceland ’ s boom - bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. this is a story that has played out many times around the globe, and many of its elements have been seen before in iceland. it might have been somewhat more extreme this time around, but it wasn ’ t fundamentally different. 2. the rise and fall of three cross - border banks operating on the basis of eu legislation ( the european “ passport ” ). this story was much more unique, as involved the first banking crisis in europe since the eu single market was formed in the early 1990s. today i am not going to talk about the build - up to these events, and i will have little to say about the second story. i have expanded on both in various publications and speeches that i can refer you to. instead, i am going to talk about what happened to the icelandic economy afterward – its deep recession and its recovery – and then reflect on some of the policy challenges that still face us. but let us first reflect on the distance that has been travelled since that fateful autumn of 2008. iceland ’ s financial sector was crumbling, and the authorities had to take extraordinary measures to keep basic domestic banking services up and running, including letting the international part of the banking system go into resolution, wiping out all equity in the banks, and removing their managers. many expected

around six hundred thousand users are registered for the transfer service. at end - 2023 close to 4. 2 million users – individuals, legal entities and entrepreneurs were registered for e - banking service, around 2. 5 times more than at end - 2016. at end - 2023, around 4. 2 million users were registered for m - banking services, around 5. 5 times more than at end - 2016. the law on financial service consumer protection and other regulations enabled distance contracts, and the data confirm that this boosted the development of digital credit products, too. the number of signed distance contracts was over 176 thousand in 2023, which is four times more than in 2019. over a fifth of these contracts were signed using video identification of consumers, nd almost a half of them were in relation to cash loans. we also enabled bank account opening and a change of a bank without the need for visiting the old bank or even a new one. let us now move forward. 1. this year, we will complete the harmonisation with eu regulations by transposing the psd2 directive into domestic legislation, which enables open banking in the republic of serbia. 4 / 5 bis - central bankers'speeches 2. alignment with the psd2 directive is a part of our preparations for joining the sepa, i. e. the single euro payments area. joining the sepa will enable the reduction of payment costs between the eu and western balkan economies, which will mean cheaper transactions for both citizens and businesses. 3. ahead of us are demanding activities concerning the development of the technical infrastructure for connecting the nbs ips system to the ecb target instant payment settlement ( tips ) scheme. to this end, we have initiated talks with the ecb. 4. the nbs ips system has also been recognised as significant by rakuten viber, with which we started cooperation, expecting instant payments to be easily initiated via viber as well. this will be an important novelty given the number of viber users in serbia. 5. we are preparing the implementation of the 3ds standard, which will further enhance the security of online payments. 6. also, within the nbs ips system we have developed a fraud management module, aimed at establishing a mechanism for detecting potential payment frauds. this module is based on adaptive machine learning and is available to all nbs ips participants that can integrate it into their information systems. the module is currently active in the nbs ips