Today, the Icelandic Financial Supervisory Authority (FME) announced it has closed Iceland’s largest bank, Kaupthing Bank hf.” in order to “guarantee a functioning domestic banking system.” As a result of FME’s actions, Kaupthing Bank hf announced that its board of directors has resigned, however the CEO will stay on to facilitate daily operations. Apparently, the action taken yesterday by the U.K. Financial Services Authority to place Kaupthing’s U.K. operations into administration triggered defaults under Kaupthing’s outstanding debt, which precipitated the FME’s actions. Over the past three days, the FME has taken control of Iceland’s three largest banks.

In a second press release, FME announced that it had “decided to transfer a part of Landsbanki’s operations to a new bank,” called New Lansbanki Islands hf., “that has been formed and is fully owned by the Icelandic Government.” FME clarified that “Landsbanki’s international operations are separated,” but all “domestic branches, call centres, ATM’s and internet banking will be open for business as usual.” New Landsbanki Islands hf will take over all the Landsbanki’s “deposits in Iceland, and also the bulk of the bank’s assets that relate to its Icelandic operations, such as loans and other claims.” Further, “an independent evaluation of the value of assets and liabilities, together with a final settlement will be made within the next 30 days.” New Lansbanki Island hf’s equity will be ISK 200 billion and the size of the balance sheet will be around ISK 2.3 billion.

In a related announcement, U.K. Treasury stated it is “taking steps to ensure the interests of individual depositors are safeguarded and UK creditors of Landsbanki are treated fairly” and “has put in place arrangements to ensure that all retail depositors in Landsbanki (including their “Icesave” products), Heritable, and Kaupthing Singer and Friedlander (including their “Edge products”) will receive their money in full.” Additionally, U.K. Treasury “made an Order to freeze funds owned, held or controlled by Landsbanki,” but has not frozen “assets of subsidiaries of Landsbanki Island hf.” U.K. Treasury also stated it is working with the Icelandic authorities regarding these entities.