Kaupthing Bank's Road to Recovery and Resolution

Kaupthing Bank's collapse in 2008 was one of the most significant financial crises in Icelandic history. The bank's assets were seized by the Icelandic government, and a resolution process was initiated to recover losses and restore stability.

In 2011, the Icelandic government passed the Icelandic Banking Resolution Act, which established a framework for resolving the country's failed banks, including Kaupthing. This act paved the way for the resolution of Kaupthing's assets and liabilities.

The resolution process involved the sale of Kaupthing's assets, including its subsidiaries and real estate holdings, to recover as much value as possible. This process was complex and time-consuming, but ultimately helped to minimize losses for creditors and taxpayers.

Kaupthing's resolution was a critical step towards rebuilding the Icelandic financial system and restoring confidence in the country's banks.

Iceland's main regulatory body, the Financial Supervisory Authority, took control of Kaupthing to ensure continued commercial bank operations in Iceland.

Domestic deposits at Kaupthing will be fully guaranteed by the government.

The banks are the first European firms to default since the credit crisis began, marking a significant milestone in the financial crisis.

The default of Kaupthing follows other high-profile credit events in the past month, including those of Fannie Mae and Freddie Mac, Lehman Brothers, and Washington Mutual.

A settlement auction for CDS tied to Fannie Mae and Freddie Mac took place on October 6, with auctions on Lehman and Washington Mutual scheduled for October 10 and October 14.

In cash settled CDS transactions, protection sellers are required to pay the par value of defaulted bonds to protection buyers, minus the recovery rate.

Additional reading: Mutual Savings Bank

Resolution Committees were appointed to oversee the affairs of Kaupthing Bank, as well as its sister banks, Glitnir and Landsbanki. This was a result of the Icelandic Financial Supervisory Authority's decision to dismiss the Boards of the three banks.

The Resolution Committees took charge of supervising the banks, handling their assets, and conducting their business operations. This was a crucial step in stabilizing the banks and preventing further financial instability.

These committees worked diligently to manage the banks' affairs, ensuring a smoother transition and minimizing the impact on customers and stakeholders.

Iceland's unique geography and climate make it prone to volcanic eruptions, with around 130 volcanic eruptions occurring on the island since 1900.

The country's fragile ecosystem is also vulnerable to the effects of climate change, with rising temperatures causing glaciers to melt at an alarming rate.

Iceland's glaciers, which cover about 11% of the country, lost around 1.5 billion tons of ice per year between 2003 and 2013.

The country's glacial rivers, such as the Jökulsá á Fjöllum, are also experiencing changes due to climate change, with the water level increasing by around 10% between 1995 and 2015.

As a result of these changes, Iceland's glacial rivers are becoming more turbulent, causing concerns for the country's hydroelectric power plants, which rely on the consistent flow of glacial water.

The country's largest hydroelectric power plant, the Kárahnjúkar power plant, was forced to shut down temporarily in 2010 due to increased glacial runoff.

In the event of a bank collapse, a Resolution Committee is appointed to oversee the affairs of the bank. The Icelandic Financial Supervisory Authority is responsible for appointing these committees.

A Resolution Committee is tasked with supervising the bank's operations, handling its assets, and conducting its business. The committee's role is crucial in ensuring a smooth transition and minimizing disruptions.

In the case of Glitnir, Landsbanki, and Kaupthing, Resolution Committees were appointed to manage the affairs of these collapsed banks. The committees are responsible for making key decisions and taking necessary actions.

The Resolution Committees work closely with the bank's staff to ensure continuity of operations and protect the interests of stakeholders. Their efforts are critical in resolving the crisis and restoring stability.