> Did the Icelandic government ever agree to this liability? I believe it was part of some European agreement for open access to financial markets but I don't

> Did the Icelandic government ever agree to this liability? I believe it was part of some European agreement for open access to financial markets but I don't know the details. So I think that the answer is probably: Yes. Edit: I've upvoted a sibling post with the judgment on the case. I haven't read it all but it seems clear to me that the rules were complicated and there were good reasons to believe that Iceland had such a liability. >Was their ability to meet it ever looked in to? Obviously not sufficiently. It may be that it was looked into initially when it was small and manageable but no-one said stop when the Icelandic banks grew beyond the ability of their government to rescue. Of course if you withdraw cover you can trigger the bank run that brings down the system. With hindsight you know that you should have stepped in to restrict opening of accounts before the risky position was reached. Edit2 to add: Agree that FSA were at fault. My post was to explain the extent to which it was not an exotic foreign investment but a normal option available to regular customers and with the normal bank compensation scheme in place.