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What was the role of US accounting firms like KPMG and US ratings firms in the...

What was the role of US accounting firms like KPMG and US ratings firms in the situation in Iceland? Do you think these private firms made the right decisions?

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Iceland got deregulation of its financial services industry. In principle, it should make banks and other financial services providers to be more responsible, but it did not happen. These firms developed the tendency of moral hazard and greed to earn more profit. In the pursuit of it, these accounting and rating firms as mentioned, helped them and covered their wrong doings. Accounting agencies cleared the accounts of these institutions and rating agencies gave higher ratings their investment and financial products. As a result, people of Iceland believed upon these agencies and went for the investment in these banks and financial service providers. When financial crisis broke out, then all these people in the Iceland suffered. As a result, unemployment increased and many firms became bankrupt.

These firms made the decisions on the basis of their own profitability, rather than thinking about the general welfare of the people. So, their decisions were not right and were unethical in nature.

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