Glitner Case

9-107-050

REV: MARCH 1, 2007

MICHAEL D. KIMBROUGH GREGORY S. MILLER VINCENT DESSAIN ANE DAMGAARD JENSEN

Navigating Turbulent Waters: Glitnir Bank’s Communication Challenge during a Macroeconomic Crisis

Iceland has become known as the Northern Hemisphere’s exotic tourist destination. But, we—the banks, our government, and other key players in the finance sector—have neglected to tell the story of modern Iceland. Lack of knowledge in key target groups almost took us into an economic nosedive. The country’s problem is our problem, and during the spring our objectives became to speak on behalf of the nation, to represent the nation as well as the bank. — Bjarni Ármannsson, CEO, Glitnir You have to sell the story of Iceland to the analysts: sell them the story of Icelandic banks, so that they are comfortable with the risks and have the correct information. In that way, news is less likely to surprise them. — Tryggvi Pálsson, Director of Financial Stability, Central Bank of Iceland On Tuesday, June 6, 2006, a group of investors arrived for a visit to Glitnir Bank, one of the three major commercial banks in Iceland. The visit coincided with Standard & Poor’s (S&P’s) recent downgrade of Iceland’s sovereign debt and the stepping down of Halldór Ásgrímsson, the prime minister of Iceland, the previous evening. These two events were unconnected but came against the backdrop of months of public speculation about the health of the Icelandic economy. Although concerns about Iceland’s economy had been brewing since the fall of 2005, they came to a head when Fitch rating agency revised its rating outlook for the country to negative in February 2006. The Fitch report cited an overheating Icelandic economy with excessive indebtedness. Research reports released in March 2006 echoed Fitch’s concerns and gave rise to a spate of news headlines casting an unfavorable light on the Icelandic economy. Investor response to the media frenzy was dramatic—the Icelandic króna depreciated...