Posts Tagged ‘Kaupthing Bank’
Think outside the box but keep a safe net at hand
Had Icelandic banks not gone for creating a bigger market for them what the pool at home proved to be to small for all of them, maybe they wouldn’t have been so affected by the financial crisis, which has eventually led for some of them end up nationalized. But two of Iceland’s biggest banks, Landsbanki and Kaupthing Bank, have changed their business models with the use of internet when the Icelandic population was not enought to help them post yoy grows. The two banks benefited from what US journalist and writer Thomas Friedman calls a flattener: the internet. Internet banking allowed the two banks gain customers from all over Europe, which perhaps was one of the main reasons they’ve been so affected when customers started a run on banks. So all these internet branches the Icelandic banks had created were actually under the Icelandic Central Bank umbrella – because they didn’t have a physical presence in other European countries, they were not protected by various Central Banks, and it was all on Iceland shoulders. And it is a small country and a small economy.
So globalization – because this was basically what had happened: banks interconnected in an internet-based way, and anyone from Uk, let’s say, because this was the most used example, could have opened accounts and keep their money in Iceland; I think people thought it to be a remote vault under the layer of ice nobody would ever touch – again, globalization has reached a point where it really needs some rules, some safeguard nets to prevent it all from crashing in a domino movement.
What Icelandic banks did was to inovate, or think outside the box, and this is good. What was bad was that they hadn’t thought of the worse that could have happened – which eventually has.
This story in The Economist brings a wider picture. The last thing I can say is that I thank God we’re not all that sophisticated here in Romania. Which is similar to another saying which applies this days: Thanks God I am not rich because I could have lost all my money!
