The story
In establishing Landsbanki, the Icelandic parliament hoped to boost monetary transactions and encourage the country's nascent industries. Following its opening on 1 July 1886, the bank's first decades of operation were restricted by its limited financial capacity; it was little more than a savings and loan society. Following the turn of the 20th century, however, Icelandic society progressed and prospered as industrialization finally made inroads, and the bank grew and developed in parallel to the nation. In the 1920s, Landsbanki became Iceland's largest bank and was made responsible for issuing its banknotes. After the issuing of banknotes was transferred to the newly established Central Bank of Iceland in 1961, Landsbanki continued to develop as a commercial bank, expanding its branch network in the ensuing decades.
While still publicly owned it went through a state-directed merger with Samvinnubanki (Cooperative Bank).
Liberalisation of financial services, beginning in 1986, opened up new opportunities, which the bank managed to take advantage of despite some economic adversity. In 1997, Landsbanki was incorporated as a limited-liability company, and the ensuing privatization finally concluded in 2003. Landsbanki then operated as a privately owned bank, competing in a free market, with substantial international activities added to its traditional Icelandic operations.
International expansion
The relatively limited size of the Icelandic market prompted Landsbanki, the first among Icelandic commercial banks, to expand and diversify outside of Iceland when it acquired the London-based Heritable Bank in 2000. In 2005, Landsbanki acquired three Europe securities houses: Teather & Greenwood, located in London and Edinburgh; Kepler Capital Markets, headquartered in Paris; and Merrion Capital Group in Dublin. These subsidiaries dealt in securities and prepared equity research in London, Paris, Frankfurt, Zürich, Nyon (25 km from Geneva), Milan, Madrid and Amsterdam. Landsbanki's own branches in London and Amsterdam specialized in structured finance and commercial finance (asset-based lending), while Landsbanki Luxembourg handled private banking and wealth management, as well as corporate services.
On 9 August 2007 Landsbanki completed its acquisition of UK investment bank Bridgwell plc. The operations of Teather & Greenwood were combined with those of Bridgewell under the brand name Landsbanki Securities (UK). The acquisition of Bridgewell made Landsbanki the second largest broker to listed companies on the London Stock Exchange measured by the number of clients.
In December 2008 Kepler Capital Markets is sold to management and staff through a management-led buy-out (MBO).
Icesave
An online savings account program for the UK market, Icesave, was launched in October 2006. Icesave grew rapidly, and on 31 March 2007, its deposits totaled £2.8 bn with over 80,000 accounts opened.
A key factor in Icesave's appeal to savers was its interest rate guarantee: The gross Annual Equivalent Rate of Interest (AER) paid on balances over £250 was guaranteed to exceed the Bank of England Base Rate by at least 0.25% until 1 October 2009 and thereafter not to be lower than the Bank of England Base Rate until 1 October 2011. As a result, Icesave quickly became the market leader in Internet deposit savings accounts in the UK in terms of interest rates.
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Icesave operated in the Netherlands from May 2008 until October 2008.
On 7 October 2008 the Icesave UK website announced: "We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologize for any inconvenience this may cause our customers. We hope to provide you with more information shortly." and Icesave was declared in default on 8 October 2008, taking Landsbanki with it in its fall.
2008 financial crisis
On October 7, 2008, the Icelandic Financial Supervisory Authority took control of Landsbanki. A press release by the IFSA states that all of Landsbanki's domestic branches, call centers, ATMs, and internet operations will be open for business as usual and that all domestic deposits are fully guaranteed. The Guardian reported that the Government had moved quickly to use the sweeping powers granted by the Reykjavik parliament, the night before. The country's financial regulator said on Tuesday that Landsbanki's branches would open as usual and that all “domestic deposits” were fully guaranteed. The next day the United Kingdom Chancellor of the Exchequer Alistair Darling announced that his government would foot the entire bill for British Icesave savers, estimated at £4 billion, and that he was taking steps to freeze the assets of Landsbanki using the financial freezing-orders provisions of the Anti-terrorism, Crime and Security Act 2001.
Under the Landsbanki Freezing Order 2008, passed on 8 October 2008, Her Majesty's Treasury froze the assets of Landsbanki in the UK, and assets belonging to the Central Bank of Iceland, and the Government of Iceland relating to Landsbanki.
On 9 October 2008 the domestic, Icelandic branch was split off into the NBI, Nýi Landsbanki (New Landsbanki) and on 27 October 2008 the inability to render payment of deposits was declared for the remaining parts of Landsbanki.
From Wikipedia’s article on Landsbanki, shared under CC BY-SA 4.0.5