One day after Iceland’s Financial Supervisory Authority (FME) seized control of Iceland’s second-largest bank, Landsbanki hf., it announced that it has also taken control of Glitnir Bank hf., the country’s third-largest bank. Although the FME had previously acquired a 75% interest in Glitnir Bank, it took this action “to ensure the continued orderly operation of domestic banking and the safety of domestic deposits.” The FME has assured customers that “all domestic deposits are fully guaranteed. Glitnir’s domestic branches, call centers, cash machines (ATMs) and internet operations will be open for business as usual.” Glitnir Bank has issued its own statement describing the receivership and its continuing operations.
Kaupthing Bank hf., Iceland’s largest bank, confirmed that it is in talks with the FME about possible involvement in Glitnir Bank’s reorganization. However, Kaupthing is not without its own difficulties. Earlier today, the U.K. Treasury announced that the Financial Services Authority (FSA) had determined that Kaupthing’s U.K. banking subsidiary, Kaupthing Singer & Friedlander (KSF) “no longer meets its threshold conditions, and is likely to be unable to continue to meet its obligations to depositors” and is “in default for the purposes of the Financial Services Compensation Scheme.” The FSA placed KSF into administration and arranged for the transfer of KSF’s Edge deposits to ING Direct. All other retail deposits (non-Edge retail deposits) “will be repaid to depositors who are eligible to claim under the Financial Services Compensation Scheme, including in respect of deposits in excess of the £50,000 limit under the Scheme, with the government covering deposits in excess of the FSCS limit.”
Separately, Riksbank, the Swedish central bank, announced that it would “provide liquidity assistance on special terms with a loan of up to five billion krona [($700 million)] to Kaupthing Bank Sverige AB,” Kaupthing’s Swedish banking subsidiary. The Riksbank stated that it has “analysed the bank’s assets, ability to repay and capital structure and found that the bank is capable of meeting its obligations if it receives liquidity assistance” and that the Swedish Financial Supervisory Authority “has made the assessment that the bank is solvent.”
Finally, the fall-out from Landsbanki’s failure continues. The U.K. Treasury announced today that it has taken action “to protect the retail depositors” in Icesave, a U.K.-based branch of Landsbanki, and Heritable, a U.K.-based banking subsidiary of Landsbanki. With respect to Icesave, the U.K. government has “taken steps to freeze assets of Landsbanki in the UK” and is “working with the Icelandic authorities and their Deposit Insurance Scheme to ensure that depositors are paid back as quickly as possible.” With respect to Heritable, the FSA has determined that it “no longer meets its threshold conditions, and is likely to be unable to continue to meet its obligations to depositors.” The FSA has transferred all of Heritable’s retail deposits to ING Direct, and placed the rest of Heritable’s business into administration.