Financial services

Icelandic banks

The UK Government continues to work closely with the Icelandic authorities to ensure fair treatment for UK depositors and creditors, following the failures of several leading Icelandic banks in 2008.

Prior to the financial crisis, Icelandic banks had expanded overseas and had a large UK customer base. In October 2008, major Icelandic banks Glitnir, Landsbanki, and Kaupthing failed – the latter two resulting in UK Government intervention. Landsbanki operated a UK bank subsidiary, Heritable, operating ‘Icesave’ accounts for UK customers. Kaupthing had a UK-based business, Kaupthing Edge, operated by parent company Kaupthing Singer & Friedlander (KSF).

On 7 October 2008, Landsbanki was placed into receivership in Iceland.

In order to protect the funds of UK depositors, the Landsbanki Freezing Order was enacted in the UK in October 2008. This froze the assets of Landsbanki in the UK, as well as Landsbanki assets belonging to the Central Bank of Iceland and Icelandic Government. Meanwhile, the Financial Services Authority declared that KSF no longer met its requirements, and was likely to fail to meet its obligations to depositors.

Using special powers under the UK’s Banking (Special Provisions) Act 2008, the Treasury was able to negotiate a transfer of UK retail deposits out of the struggling banks, through an onward sale. On October 2008, ING Direct announced that it had agreed to acquire around £3bn of British deposits held in Kaupthing Edge and Heritable. The remaining UK business relating to Landsbanki and Kaupthing was placed into administration. Ernst & Young LLP has been appointed as the administrators for both institutions.

UK customers affected by the crisis in Icelandic banks may wish to contact the UK Financial Services Compensation Scheme (FSCS). Isle of Man and Guernsey based customers should refer to their own compensation schemes.

For more information, please view the following:

Icelandic banks: frequently asked questions

Report on the failure of Kaupthing Singer & Friedlander Limited

Financial Secretary to the Treasury, Mark Hoban, asked officials to detail the events leading up to the failure in October 2008 of Kaupthing Singer & Friedlander Limited (KSF), the UK subsidiary of the Icelandic bank Kaupthing Bank hf. This report was published on 25 June 2012.

Events leading up to the failure of Kaupthing Singer & Friedlander Limited (PDF 237KB)

Icelandic banks

Report on the failure of Kaupthing Singer & Friedlander Limited

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Icelandic banks

Further resources

Financial Stability index