Landsbanki - It's Rise and Fall
Since its establishment in 1885 Landsbanki has been instrumental in the economic development of business and industry in Iceland.
This Icelandic bank was established by the Icelandic parliament in hopes that it would boost monetary transactions and encourage the country’s early industries. At first the bank's operations were restricted by its limited financial capacity, but following the turn of the 20th century Icelandic society progressed and prospered. Landsbanki grew and developed with the nation.
In the 1920s Landsbanki became the largest of the Icelandic banks, and was made responsible for issuing its bank notes. This task was assigned to the Central Bank of Iceland in 1961 but Landsbanki continued to develop as a commercial bank.
With the liberalization of financial services in 1986 new opportunities became a reality and in 1997Landsbanki was incorporated as a limited-liability company. The ensuing privatization was finally concluded in 2003 when Samson Holdings became the main shareholder. Samson Holdings was owned by Bjorgolfur Thor Bjorgolfsson and his father. Landsbanki then operated as a privately owned bank, competing in a free market, with substantial international activities added to its traditional Icelandic operations.
Landsbanki soon positioned itself as Iceland's primary provider of general and specialized financial services to individuals, corporate entities and institutions. The bank held a market share of over 30% in all major business segments and has the country's most extensive branch network. At year-end 2006, Landsbankiprovided close to 40% of corporate lending in Iceland, and for around 60% of companies listed on the OMXIceland Stock Exchange, Landsbanki was their principal bank.
On October 7, 2008 the Icelandic Financial Supervisory Authority took control of Landsbanki. A press release by the IFSA stated that all of Landsbanki's domestic branches, call centers, ATMs and internet operations would be open for business as usual, and that all domestic deposits were fully guaranteed. The Brithish response to this parlimentary intervention has been claimed to have braught down the remaining Icelandic banks.
A British newspaper, the Guardian, reported that the Icelandic government had moved quickly to use the sweeping powers granted by the Reykjavik parliament, the night before. The country’s financial regulator said that all “domestic deposits” were fully guaranteed but the next day the United Kingdom Chancellor of the Exchequer Alistair Darling announced that his government would foot the entire bill for British ICESAVEsavers, 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 theGovernment of Iceland relating to Landsbanki.
On 9 October 2008 the domestic, Icelandic branch was split off into the "Nýi (= new) Landsbanki" and on 27 October 2008 the inability to render payment of deposits was declared for the remaining parts ofLandsbanki.