A guest post by Ian McCallister

As banks on both sides of the Atlantic grapple with plummeting investor confidence and increasingly tight credit, Iceland's central bank is struggling to keep its own financial system out of the speculative cross fire. In recent years, Iceland's three main banks, Glitnir, Kaupthing, and Landsbanki, have become massively leveraged in global markets, and total assets valued at more than eight times total Icelandic GDP. Investor confidence in these banks has plummeted, pushing the Icelandic Kronor down, exacerbating Iceland's huge current account deficit, and driving up inflation past six percent last year. With small currency reserves on hand and a central bank too small to serve as a lender of last resort, Iceland's banking system appears to have gotten itself into very hot water.

Snapshot asks, what effects would an Icelandic bank collapse have in international markets?

Business Spectator: Haarde Act to Follow
Central Bank of Iceland: Monetary Policy Statement
New York Times: The North Atlantic Conspiracy
Financial Times: Concern for Iceland Grows After Rate Rise
Telegraph: Iceland Shows Cracks as Kronor Crashes
USA Today: Bank Default Worries Slam Iceland's Currency