Yummy 15% rate... Yummy...
Well, when you are offered a basic financial product that has twice the return of what the market is you have to stop and think "Is everything here proper, this looks to good to be true".
And indeed it was. This was an entire country's banking system operating a pyramid scheme with the regulator turning a blind eye.
Iceland had their base rate at nearly 15%. If its economy was selfcontained it would have all worked nicely (though with 12%+ inflation). People invest, borrow, etc - everything ticks. However due to our best beloved globalisation exercise people from outside Iceland got a chance to invest and Icelandic banks got a chance to offer them services. They still offered these "competitive rates". However they payed the rates back from _INVESTMENTS_ by new entrants, not from actual economic activity. OK, it may have been hidden by them paying from one pocket and borrowing internationally into the other, but the overall scheme is still same - pyramid in its classic definition: "Payments to old entrants are performed from investment by new entrants".
It is a classic example of what globalisation + lack of regulatory oversight result in. It is the first, however it will not be the last. There are PLENTY of countries with rates that exceed UK by a considerable margin. Similarly, the UK rate is higher than the rate in many places. So we will are likely to see this from both the "UK" and the "Icelandic" side quite a few more times.
Everyone, hail the globalisation!!!
Me coat, the one with - "If it is too good to be true, turn around and walk slowly".