Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181012
S. Sigurgeirsdóttir, Gudrun Johnsen
Abstract Public trust in institutions in Iceland plunged after the country’s banking sector collapsed. The political system wobbled under outrage and anger when the general public took to the streets. The Parliamentary Special Investigation Commission conducted a ground-breaking crisis-induced investigation, delivering a report that was a milestone in Iceland’s history of politics and public administration. Yet, despite this endeavour and the fact that subsequent investigations have disclosed ample information intended to restore trust in institutions, public trust remains unsteady. This chapter addresses the following questions: How has public trust in institutions progressed after the crash? Why is it taking so long for trust to return? In Chapter 3 in this volume, we examine data on public trust in Icelandic institutions from Gallup surveys over the 15 years from 2002 to 2017 in order to identify and explain patterns of trust in the aftermath of the crisis. Our interpretation of theory in this chapter suggests that elements of mistrust inherent in the principal–agent approach to accountability in public administration, implemented in previous New Public Management reforms, undermined the creation of a climate of trust necessary to ensure effective accountability mechanisms. We argue that in the absence of a climate of trust, accountability mechanisms of culpability that conflict with mechanisms of answerability, combined with a succession of post-crisis scandals, mainly explain the slow return of the public’s trust.
冰岛银行业崩溃后，公众对冰岛机构的信任度大幅下降。当公众走上街头时，政治体系在愤怒和愤怒中摇摇欲坠。议会特别调查委员会(Parliamentary Special Investigation Commission)开展了一项由危机引发的开创性调查，并提交了一份报告，成为冰岛政治和公共行政史上的一个里程碑。然而，尽管做出了这种努力，而且随后的调查披露了大量旨在恢复对机构信任的信息，但公众的信任仍然不稳定。本章讨论了以下问题:危机后公众对机构的信任是如何发展的?为什么要花这么长时间才能恢复信任?在本卷的第3章中，我们研究了2002年至2017年15年间盖洛普调查中关于冰岛机构公众信任的数据，以确定和解释危机后的信任模式。我们在本章中对理论的解释表明，在以前的新公共管理改革中实施的公共行政问责制的委托-代理方法中固有的不信任因素破坏了确保有效问责机制所必需的信任气氛的创造。我们认为，在缺乏信任氛围的情况下，与责任机制相冲突的责任问责机制，再加上危机后一连串的丑闻，是公众信任恢复缓慢的主要原因。
{"title":"Chapter 8: Public Trust in Institutions in Pre- and Post-Crisis Iceland (II): Institutionalised Mistrust","authors":"S. Sigurgeirsdóttir, Gudrun Johnsen","doi":"10.1108/978-1-78743-347-220181012","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181012","url":null,"abstract":"Abstract \u0000Public trust in institutions in Iceland plunged after the country’s banking sector collapsed. The political system wobbled under outrage and anger when the general public took to the streets. The Parliamentary Special Investigation Commission conducted a ground-breaking crisis-induced investigation, delivering a report that was a milestone in Iceland’s history of politics and public administration. Yet, despite this endeavour and the fact that subsequent investigations have disclosed ample information intended to restore trust in institutions, public trust remains unsteady. This chapter addresses the following questions: How has public trust in institutions progressed after the crash? Why is it taking so long for trust to return? In Chapter 3 in this volume, we examine data on public trust in Icelandic institutions from Gallup surveys over the 15 years from 2002 to 2017 in order to identify and explain patterns of trust in the aftermath of the crisis. Our interpretation of theory in this chapter suggests that elements of mistrust inherent in the principal–agent approach to accountability in public administration, implemented in previous New Public Management reforms, undermined the creation of a climate of trust necessary to ensure effective accountability mechanisms. We argue that in the absence of a climate of trust, accountability mechanisms of culpability that conflict with mechanisms of answerability, combined with a succession of post-crisis scandals, mainly explain the slow return of the public’s trust.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127499327","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181010
Gudrun Erla Jonsdottir
Abstract Competence, credibility, image and integrity all came under scrutiny during the economic crisis in Iceland. This period was not just about the financial system, it was about trust, something the Icelandic economy and individual businesses in the country lost in the wake of the crash. Reykjavik Energy, an Icelandic power- and utility-company, was one such company. In the year leading up to the economic crisis, mistrust in Reykjavik Energy had taken root and the firm’s image was already under attack. When its external debt doubled in the crash with the depreciation of the Icelandic krona, it was clear that the company’s position was unsustainable. In the years following the crisis, the rebuilding of the public’s trust in Reykjavik Energy has been a demanding task. The project of restoring trust and strengthening the firm was two-fold. On the one hand, short-term measures that were necessary to keep the company alive were taken. On the other hand, work was done to develop the foundations for long-term results and sustainable management. Reykjavik Energy, to a large extent, has now reclaimed its position in the eyes of its stakeholders. However, trust is not a constant but something that is earned over time and the challenge for the future is therefore to maintain it while learning from the past.
{"title":"Chapter 7: A Question of Trust: The Story of Reykjavík Energy","authors":"Gudrun Erla Jonsdottir","doi":"10.1108/978-1-78743-347-220181010","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181010","url":null,"abstract":"Abstract \u0000Competence, credibility, image and integrity all came under scrutiny during the economic crisis in Iceland. This period was not just about the financial system, it was about trust, something the Icelandic economy and individual businesses in the country lost in the wake of the crash. Reykjavik Energy, an Icelandic power- and utility-company, was one such company. In the year leading up to the economic crisis, mistrust in Reykjavik Energy had taken root and the firm’s image was already under attack. When its external debt doubled in the crash with the depreciation of the Icelandic krona, it was clear that the company’s position was unsustainable. In the years following the crisis, the rebuilding of the public’s trust in Reykjavik Energy has been a demanding task. The project of restoring trust and strengthening the firm was two-fold. On the one hand, short-term measures that were necessary to keep the company alive were taken. On the other hand, work was done to develop the foundations for long-term results and sustainable management. Reykjavik Energy, to a large extent, has now reclaimed its position in the eyes of its stakeholders. However, trust is not a constant but something that is earned over time and the challenge for the future is therefore to maintain it while learning from the past.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128088480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181008
F. M. Baldursson, R. Portes
During the banking crisis of October 2008, Iceland became the first developed country in decades to seek the assistance of the International Monetary Fund (IMF). Iceland’s IMF programme provided a measure of stability at a time of intense turbulence. The IMF’s credibility was helpful during this period of collapse not just of the banks but also of the public trust towards almost all Icelandic institutions. Importantly, the IMF implicitly supported Iceland’s policy of letting institutional creditors of the banks rather than Icelandic taxpayers bear the costs of their collapse; this provided credibility for the policy and limited repercussions. In a reversal of previous IMF policy, capital controls were imposed. The controls helped stabilise the exchange rate, and inflation subsided. The controls also helped recovery after the crisis by shielding the economy from international financial shocks. The direct fiscal cost of the Icelandic crisis was very high, but the considerable and painful fiscal tightening that was a part of the programme was needed to avoid a sovereign debt crisis. This helped in regaining trust from international markets. Mistakes were made in the design and implementation of the IMF programme, but overall, we judge that its contribution was positive. The programme provided one of the elements for restoring trust in Iceland when it was most needed, both domestically and internationally, during the depth of the crisis in 2009–2010.
{"title":"Chapter 6: Restoring Trust in Iceland: Iceland’s IMF Programme","authors":"F. M. Baldursson, R. Portes","doi":"10.1108/978-1-78743-347-220181008","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181008","url":null,"abstract":"During the banking crisis of October 2008, Iceland became the first developed country in decades to seek the assistance of the International Monetary Fund (IMF). Iceland’s IMF programme provided a measure of stability at a time of intense turbulence. The IMF’s credibility was helpful during this period of collapse not just of the banks but also of the public trust towards almost all Icelandic institutions. Importantly, the IMF implicitly supported Iceland’s policy of letting institutional creditors of the banks rather than Icelandic taxpayers bear the costs of their collapse; this provided credibility for the policy and limited repercussions. In a reversal of previous IMF policy, capital controls were imposed. The controls helped stabilise the exchange rate, and inflation subsided. The controls also helped recovery after the crisis by shielding the economy from international financial shocks. The direct fiscal cost of the Icelandic crisis was very high, but the considerable and painful fiscal tightening that was a part of the programme was needed to avoid a sovereign debt crisis. This helped in regaining trust from international markets. Mistakes were made in the design and implementation of the IMF programme, but overall, we judge that its contribution was positive. The programme provided one of the elements for restoring trust in Iceland when it was most needed, both domestically and internationally, during the depth of the crisis in 2009–2010.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128421586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181016
Jon Thor Sturluson
Abstract Since the financial crisis of 2008, legislation and rules affecting the financial market in Iceland have been strengthened considerably. Tougher capital requirements, detailed and frequent reporting, more thorough fit-and-proper tests, barriers to connected lending and strict limits on bonus payments are but a few examples. Similarly, the supervision of banks has been upgraded markedly. It is now much more intrusive and forward-looking than before, that is, it is more focused on governance and the business model. Many of these reforms are based on international initiatives, such as the Basel III standard, while others are particular to Iceland. The main objective of these reforms is to strengthen the resilience of the banking sector and limit the negative effects on consumers of harmful enterprise incentives. Trust in the financial system collapsed as a consequence of the crisis but is recovering only slowly. This apparent lack of confidence is reflected only to a limited extent in firms’ and households’ willingness to seek banking services. This raises the questions of how to appropriately measure trust, and what factors influence it. Iceland may turn out to be an interesting natural experiment in this respect. It has a unique record of prosecuting and sentencing bankers for offences that are hardly worthy of administrative fines in some other countries – but whether strict accountability is the recipe for rebuilding trust remains to be seen.
{"title":"Chapter 11: Post-Crisis Regulation and Supervision of Icelandic Banks","authors":"Jon Thor Sturluson","doi":"10.1108/978-1-78743-347-220181016","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181016","url":null,"abstract":"Abstract \u0000Since the financial crisis of 2008, legislation and rules affecting the financial market in Iceland have been strengthened considerably. Tougher capital requirements, detailed and frequent reporting, more thorough fit-and-proper tests, barriers to connected lending and strict limits on bonus payments are but a few examples. Similarly, the supervision of banks has been upgraded markedly. It is now much more intrusive and forward-looking than before, that is, it is more focused on governance and the business model. Many of these reforms are based on international initiatives, such as the Basel III standard, while others are particular to Iceland. The main objective of these reforms is to strengthen the resilience of the banking sector and limit the negative effects on consumers of harmful enterprise incentives. Trust in the financial system collapsed as a consequence of the crisis but is recovering only slowly. This apparent lack of confidence is reflected only to a limited extent in firms’ and households’ willingness to seek banking services. This raises the questions of how to appropriately measure trust, and what factors influence it. Iceland may turn out to be an interesting natural experiment in this respect. It has a unique record of prosecuting and sentencing bankers for offences that are hardly worthy of administrative fines in some other countries – but whether strict accountability is the recipe for rebuilding trust remains to be seen.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114776235","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181018
Murray J. Bryant, Throstur Olaf Sigurjonsson, M. Mixa
Abstract This chapter examines the formal governance mechanisms put in place by various authorities within Iceland after the crash. In contrast to one of our earlier papers (Bryant, Sigurjonsson, & Mixa, 2014), we find that, no matter how well the mechanisms work, formal mechanisms are insufficient to restore trust. To that end, we examine the trust literature from political science that suggests that trust is a lubricant of the social system that consequently causes individuals to open themselves up to vulnerability. When trust is broken in a society with a high-existing degree of trust, such as Iceland, the loss of trust is significant and leads even apparently minor incidents to be perceived as betrayals. We examine the various processes put in place by both the government and other institutions and show how they mostly worked in concert. Nonetheless, we find that the processes by themselves have been insufficient to restore society’s trust in the affected institutions.
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Pub Date : 2018-07-23DOI: 10.1108/978-1-78743-347-220181005
Einar Már Guðmundsson
Abstract It seems a commonplace notion that when we talk about trust, we are really talking about the lack of trust. After all, if there were solid trust throughout society, we would not have to talk about it at all. But if we discuss lack of trust, are we to start with institutions or the individuals in the institutions? It would help us if we knew whether we need to fix wayward institutions or educate individuals for more ethical behaviour. Moving from thoughts of the ideal to the practical, we have seen how Icelanders have felt the effect of institutions and individuals gone astray in a two-fold manner: first, through the actions of those parties; second, as they listened to the painful but necessary story of those days in its repeated telling by the Special Investigative Commission. Hope remains, however, because, as natural disasters show us, when stripped of its trappings, human character can still revive our sense of trust.
{"title":"Chapter 4: Trust: Some Questions from a Layperson","authors":"Einar Már Guðmundsson","doi":"10.1108/978-1-78743-347-220181005","DOIUrl":"https://doi.org/10.1108/978-1-78743-347-220181005","url":null,"abstract":"Abstract \u0000It seems a commonplace notion that when we talk about trust, we are really talking about the lack of trust. After all, if there were solid trust throughout society, we would not have to talk about it at all. But if we discuss lack of trust, are we to start with institutions or the individuals in the institutions? It would help us if we knew whether we need to fix wayward institutions or educate individuals for more ethical behaviour. Moving from thoughts of the ideal to the practical, we have seen how Icelanders have felt the effect of institutions and individuals gone astray in a two-fold manner: first, through the actions of those parties; second, as they listened to the painful but necessary story of those days in its repeated telling by the Special Investigative Commission. Hope remains, however, because, as natural disasters show us, when stripped of its trappings, human character can still revive our sense of trust.","PeriodicalId":145304,"journal":{"name":"The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis","volume":"217 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122335096","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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