Iceland takes over country’s largest banking group Kaupthing

October 9th, 2008 - 5:28 pm ICT by IANS  

Reykjavik, Oct 9 (DPA) Iceland’s largest bank group Kaupthing was Thursday taken over by the Icelandic Financial Supervisory Authority.Kaupthing was the third of the North Atlantic nation’s major banks to be taken over by the agency under provisions of special legislation adopted late Monday.

Earlier this week the agency took over Landsbanki and Glitnir.

Kaupthing board chairman Sigurdur Einarsson said in a statement that the bank had approached the Icelandic authorities and that the entire board of directors of the bank has resigned.

The move was linked to the knock-on effect of big withdrawals by British depositors from rival banking group Landsbanki’s deposit account Icesave in Britain, and the subsequent “significant increase in the outflow of deposits from Kaupthing Edge (Kaupthing’s UK online savings arm)” in Britain, he said.

Kaupthing’s domestic deposits were “fully guaranteed” and domestic operations were to remain open for business as usual, the Financial Supervisory Authority said adding that the move was “guarantee a functioning domestic banking system.”

The Swedish central bank Wednesday approved a 5-billion-kronor ($700 million) loan to the Swedish branch of Kaupthing, Kaputhing Bank Sverige AB.

Swedish deputy central bank governor Irma Rosenberg said Thursday the loan was for Kaupthing Bank Sverige and was part of measures to ensure that the Swedish financial system functions.

Kaupthing Bank Sverige said Thursday it would continue its operations with sufficient liquidity.

A week ago, the government of Iceland bought a majority stake in Glitnir bank, paying 600 million euros (815 million dollars) for a 75-percent stake.

The commercial banks in the island nation of 300,000 people have rapidly expanded their operations in recent years.

Prime Minister Geir Haarde earlier this week noted that “their liabilities are now equivalent to many times Iceland’s GNP.”

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