When Sigurjón Árnason, former chief executive of Landsbanki, appeared before Iceland's independent "truth commission" last summer, he recalled the sense of confidence that pervaded the country's banking sector until 2008. It had "not occurred to anyone that there was a remote chance of a collapse like that which [would] later come to pass", he said, according to the long-awaited commission report into the Icelandic bank crash published April 12, the Financial Times reported. It was a complacency that spread from the bank headquarters to the regulators, central bank, government and, ultimately, the Icelandic public, most of whom were happy to share in the spoils of the financial boom. Yet the commission report - the result of a 15-month investigation by an independent panel app-ointed by Iceland's parliament - says the warning signs should have been clear long before Mr Árnason warned the central bank in March 2008 that Landsbanki was sitting on a "time bomb". The seeds of crisis were laid several years earlier, when, unshackled by government liberalisation of the financial sector, Icelandic banks set out to turn their isolated Atlantic island nation into an international financial centre. In 2005 alone, the three big banks - Landsbanki, Glitnir and Kaupthing - issued about €14bn in foreign debt securities, most of it maturing in three to five years. It was the equivalent, said Sigridur Benediktsdottir, one of the commission members, of US banks issuing $14,000bn in debt, considering the respective sizes of the two economies. Buoyed by Iceland's triple-A credit rating, refinancing was not a problem as long as global markets were benign. But when the economic skies darkened in 2007, the banks were forced to scramble for new sources of funding. Their solution was to open overseas branches that attracted billions of pounds and euros in deposits from foreign savers attracted by some of the highest interest rates in the market. Foreign deposits became a crucial source of funding for the banks as the credit markets seized up, but they greatly increased the systemic risks facing the tiny Icelandic economy. By the middle of 2007, deposits in Landsbanki's UK branch, which included the popular Icesave online bank, amounted to £5.5bn. "In light of the fact that the foreign currency reserves of the Central Bank of Iceland were only £1.2 bn at that time, it may be viewed as certain that the Central Bank would not have been able to act as a lender of last resort to Landsbanki if that proved necessary," the report said. The commission catalogued a series of increasingly fraught meetings between Icelandic and British officials in the run-up to the crash as UK regulators pressed Landsbanki to transfer the Icesave accounts to a UK subsidiary that would fall under the remit of the British deposit guarantee fund. Landsbanki dragged its feet on the move - leaving Icelandic taxpayers with a €3.9bn bill for the Icesave losses. "In seven years [before the crisis] the three banks became 20 times bigger and that is the main reason for the fall of the economy," said Ms Benediktsdottir. The report outlined how the banks were used by their owners - known as the "Viking Raiders" - to finance the expansion of big overseas business and financial empires, including extensive investments in the UK retail sector.