A much anticipated "Truth Report" published Monday highlighted "extreme negligence" by former Icelandic leaders and explosive bank growth as the main causes of the 2008 financial crisis that crippled the country's economy.
Former prime minister "Geir H. Haarde, Arni M. Mathiessen, former finance minister, and Bjoergvin G. Sigurdsson, former minister of banking, showed extreme negligence before the fall of the three banks in October 2008," the Special Investigation Commission (SIC) wrote.
The report, more than 2,000 pages long, was commissioned by lawmakers at the end of 2008, shortly after Iceland's three major banks went bust, dragging down its once booming financial sector and sending the Icelandic krona plunging.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Bank head implicated
David Oddsson, another former prime minister who was head of Iceland's central bank at the time of the economic implosion, was also blamed for the deep crisis, as were his fellow bank directors at the time and the former head of the country's Financial Supervisory Authority.
Oddsson and Haarde had in the spring of 2008 hidden information from relevant ministers and the government about the country's upcoming financial crisis, SIC committee chief Pall Hreinsson told reporters in Reykjavik.
"In April 2008, there were at least five meetings between the prime minister, the minister of finance and the foreign minister and directors of the central bank on the banks' situation and the situation of the economy," he said.
Finance sector key in boom
Banking minister Sigurdsson had however not been informed of "anything that went on in those meetings and the government was not shown any notes from these meetings," he said, adding that a summary of the report had been handed to prosecutors along with suggestions on how to proceed.
Iceland's great prosperity before the crisis was heavily based on its swelling banking sector, with its major banks, Kaupthing, Landsbanki and Glitnir, seeing their assets swell from equalling 100 percent of Iceland's gross domestic product (GDP) in 2004 to 923 percent at the end of 2007, according to IMF figures.
"In seven years the three banks became 20 times bigger and that is the main reason for the fall of the economy," SIC committee member Sigridur Benediktsdottir told reporters.
'Inappropriate loans'
The former bank heads had also helped bring about the downfall by taking "inappropriate loans from the banks," she said.
SIC member Salvor Nordal meanwhile stressed that most mistakes in the immediate run-up to the crisis were caused not by greed or malice, but by lacking experience.
"The main players did not have the capacity or experience to diminish the damage of the fall on our economic system," she told reporters.
While individual incompetence played a part, the SIC report concluded that "the most important lessons to draw from theses events are about weak social structures, political culture and public institutions."
"In the wake of a flawed process of privatisation, where inexperienced owners gained large shares, the banks were allowed to grow far beyond the ability to supervise them properly," it said.
Protests lead to govt change
Massive protests over the crisis at the end of 2008 and beginning of 2009 forced Haarde of the rightwing Independence Party and his coalition government from power.
Prime Minister Johanna Sigurdardottir, who became head of Iceland's first leftwing government after the crisis, welcomed Monday's report.
"This important report will enable us to look forward by understanding what took place here," she said in a statement.
"Iceland needs closure in order to fully focus on and finish the reconstruction which lies ahead. I believe that this report with its difficult and painful truths is a crucial part of that process," she added.
