Kaupthing Bank
A formerly major Icelandic international bank that was placed under government control during the 2008 Icelandic banking crisis.
Last updated August 26, 2026
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Overview
Kaupthing Bank was a major Icelandic banking group whose expansion from a small financial-advisory and securities-brokerage operation into an international bank made it one of the most prominent institutions in Iceland before the global financial crisis. Founded in 1982, the business initially focused on financial advice and securities brokerage. It became involved in the development of Iceland's modern capital market and was one of the founding participants in the Icelandic Stock Exchange. During the 1990s, it began expanding outside Iceland, becoming the first Icelandic financial institution to establish operations abroad. The bank's growth accelerated after its listing on the Icelandic Stock Exchange in October 2000 and a secondary listing in Stockholm in 2002. In 2003, Kaupthing merged with Búnaðarbanki Íslands, the Agricultural Bank of Iceland, creating the enlarged Kaupthing Bank group. The bank subsequently built a broad Nordic and European footprint through acquisitions and new branches. Its transactions included the purchase of Finnish, Swedish, Norwegian, Danish and British financial businesses, including FIH in Denmark and Singer & Friedlander in the United Kingdom. By the period immediately before the crisis, the group operated in thirteen countries and employed more than 3,300 people, including a substantial Icelandic retail network. Kaupthing's business covered retail banking, corporate and investment banking, private banking, asset management, securities services and capital-markets activities. Its international strategy was particularly important: according to the cited Wikipedia material, roughly 70 percent of operating profit originated outside Iceland, with the United Kingdom and Scandinavia making especially significant contributions. The group also developed Kaupthing Edge, an internet-based deposit brand designed to attract retail funding in several European countries through savings and fixed-term deposit products. The rapid growth of Kaupthing and other Icelandic banks was supported by large-scale international borrowing and an increasingly leveraged balance sheet. In 2007, the bank announced an agreement to acquire the Dutch merchant bank NIBC for approximately €3 billion, although the proposed transaction was cancelled in early 2008. It also acquired or invested in businesses in Belgium, India and the Isle of Man. These expansion plans took place as liquidity conditions in global markets were deteriorating. In October 2008, the collapse of Iceland's banking system led to the failure of Kaupthing's operating model. After the United Kingdom transferred Kaupthing's UK internet-deposit accounts to ING Direct and placed the UK operation into administration, Iceland's Financial Supervisory Authority took control of Kaupthing on 9 October 2008. The Icelandic domestic business was separated into a new institution, initially called New Kaupthing and later renamed Arion Bank. The remaining non-Icelandic assets and liabilities stayed with the old Kaupthing estate, which obtained a moratorium on payments and ceased normal operations. The bank's collapse also generated investigations and criminal proceedings concerning lending to shareholders, alleged market manipulation and the conduct of senior executives. A confidential internal lending document was published by WikiLeaks in 2009, prompting public controversy and legal threats. Several former executives and associated figures were later convicted in Iceland; the Supreme Court upheld the principal convictions in 2015. Kaupthing Bank itself remains defunct, while the resolution of its former assets, debts and claims has continued through liquidation and successor entities.
History
Kaupthing began in Iceland in 1982 as a small agency providing financial advice and securities-brokerage services. Its development coincided with the modernization of Iceland's financial markets. The firm became one of the founding partners of the Icelandic Stock Exchange and, during the 1990s, broadened its ambitions beyond brokerage and advisory work. It was the first Icelandic financial institution to establish operations outside the country. The bank was listed on the Icelandic Stock Exchange in October 2000. The listing reduced the relative ownership of the Icelandic savings banks that had backed the original business and brought individual and institutional investors into the shareholder base. Kaupthing expanded its Nordic presence through offices and acquisitions, including operations in the Faroe Islands, Sweden, Denmark, Finland and Norway. In 2002, its shares were also listed on the Stockholm Stock Exchange. A major structural change occurred in 2003, when Kaupthing merged with Búnaðarbanki Íslands. The combined institution adopted the Kaupthing Bank identity and developed into a diversified international banking group. The following years brought further acquisitions: FIH in Denmark, Singer & Friedlander in the United Kingdom, businesses in Sweden, Finland and Norway, and private-banking and asset-management operations in Belgium. The British operations later operated under the Kaupthing Singer & Friedlander name. The group also entered the Netherlands, Luxembourg, Switzerland, the Isle of Man and other markets. Kaupthing's international expansion was accompanied by a funding strategy that increasingly relied on wholesale markets and cross-border deposits. Its Kaupthing Edge brand offered internet-managed savings and fixed-term deposit accounts in multiple European countries. The product was intended to diversify the bank's liabilities by currency, geography and customer type. Although the brand attracted substantial retail deposits, its rapid growth occurred during a period when international credit markets were becoming less liquid and confidence in Icelandic banks was weakening. In 2007, Kaupthing announced the planned acquisition of Dutch merchant bank NIBC for approximately €3 billion, but the transaction was abandoned in early 2008. The group also made a minority investment in Indian investment-services company Finoble Advisors, acquired Belgian operations from Robeco Bank and purchased Derbyshire Offshore in the Isle of Man. These initiatives reflected the bank's ambition to become a broad European financial group, but they also added complexity and exposure as the global crisis intensified. The crisis became acute in October 2008. On 8 October, the United Kingdom transferred the UK Kaupthing Edge deposit business to ING Direct and placed the UK operation into administration. The next day, after the resignation of Kaupthing's board, Iceland's Financial Supervisory Authority took control of the bank. The domestic Icelandic operations were separated into a new institution, initially known as New Kaupthing. That successor was renamed Arion Bank in November 2009. The old Kaupthing entity retained the international assets and liabilities, entered a moratorium on payments and stopped operating as a normal bank. The collapse prompted investigations into the bank's lending and trading activities. A 2009 publication of internal documents described large loans to major shareholders and related parties, including substantial exposure to Exista, an important shareholder. Former employees were prosecuted for alleged manipulation of Exista's share price, and later proceedings targeted former senior leaders over alleged market-manipulation schemes. In 2013, four former figures connected with the bank received prison sentences; the Icelandic Supreme Court upheld the convictions in 2015 and increased two sentences. The former bank's estate subsequently remained involved in asset recovery, creditor claims and the winding-down of non-Icelandic businesses.
- 2015
Supreme Court confirms convictions
[1]Iceland's Supreme Court upheld convictions in a major market-manipulation case connected with former Kaupthing leaders.
- 2009
Domestic successor renamed Arion Bank
[1]New Kaupthing, the successor to the domestic Icelandic operations, adopted the name Arion Bank.
- 2008
Government takeover and resolution
[1]The UK deposit business was transferred to ING Direct and Iceland's Financial Supervisory Authority took control of Kaupthing on 9 October.
- 2007
Expansion into Dutch and Belgian businesses
[1]Kaupthing announced the planned acquisition of NIBC and acquired Belgian private-banking and asset-management operations from Robeco Bank.
- 2005
Singer & Friedlander acquired
[1]Kaupthing acquired the British financial group Singer & Friedlander.
- 2003
Merger with Búnaðarbanki Íslands
[1]Kaupthing merged with Búnaðarbanki Íslands to form the enlarged Kaupthing Bank group.
- 2002
Stockholm listing
[1]Kaupthing shares were listed on the Stockholm Stock Exchange.
- 2000
Icelandic stock-market listing
[1]Kaupthing was listed on the Icelandic Stock Exchange.
- 1982
Kaupthing founded
[1]Kaupthing was established in Iceland as a financial-advisory and securities-brokerage agency.
Products and positioning
International Icelandic banking group
Online retail deposits · 2007
Kaupthing Edge
Kaupthing Edge was a pan-European internet banking brand offering savings accounts and fixed-term deposits. In Belgium it also offered a current account. The products were managed online with telephone support and were introduced across markets including the United Kingdom, Belgium, Norway, Finland, Sweden, Germany, Luxembourg, Switzerland, Austria and the Isle of Man. The brand was intended to diversify Kaupthing's funding base by country, currency and customer segment.
Retail banking
Kaupthing retail banking
The Icelandic retail business operated a branch network and provided consumer banking services before the domestic operations were separated from the failed international bank. The successor domestic institution continued as New Kaupthing and was later renamed Arion Bank.
Corporate and investment banking
Corporate and investment banking
Kaupthing served corporate and institutional clients through lending, capital-markets, advisory and securities activities. These businesses formed a substantial part of the group's international strategy and were delivered through subsidiaries and offices across the Nordic region and wider Europe.
Wealth management
Private banking and asset management
The group operated private-banking and asset-management businesses in several European markets, including Luxembourg, Switzerland and Belgium. These operations were among the non-Icelandic assets affected by the 2008 resolution and subsequent liquidation process.
Controversies
2015
Convictions upheld by the Supreme Court
The Icelandic Supreme Court upheld the convictions and increased the sentences of Ólafur Ólafsson and Magnús Guðmundsson.
2013
Prosecution of former senior leaders
Four former senior figures connected with Kaupthing received prison sentences in Iceland for alleged large-scale market-manipulation conspiracies associated with the financial crisis.
2009
Shareholder lending disclosures
A confidential internal document published by WikiLeaks described very large exposures to major shareholders and related parties, including loans associated with Exista. The publication intensified debate about Kaupthing's governance, concentration of credit and activities before its collapse.
2009
Exista share-price manipulation case
Former asset manager Daniel Thordarsson and former stockbroker Stefnir Ingi Agnarsson were sentenced over conduct involving purchase offers for Exista shares that prosecutors said affected end-of-day share values.
Brand decisions
2008
Resolution of Kaupthing's banking operationsStrategyBackground
The UK transfer of Kaupthing Edge deposits and the resignation of Kaupthing's board left the bank unable to continue normal operations.
Action taken
Iceland's Financial Supervisory Authority took control, while the domestic operations were separated into New Kaupthing and the remaining international estate entered a moratorium.
Aftermath
New Kaupthing later became Arion Bank, while the old Kaupthing entity was wound down with its non-Icelandic assets and liabilities.
2007
Proposed acquisition of NIBCM&ABackground
Kaupthing sought to expand its European merchant-banking presence during a period of rapid international growth.
Action taken
The bank agreed to acquire Dutch merchant bank NIBC for approximately €3 billion, then cancelled the planned acquisition in early 2008.
Aftermath
The abandoned transaction reflected the deteriorating market environment before Kaupthing's collapse.
Proposed acquisition value. (2007-2008)
2003
Merger with Búnaðarbanki ÍslandsM&ABackground
Kaupthing was expanding from a securities and advisory business into a broader banking group.
Action taken
It merged with Búnaðarbanki Íslands and operated as Kaupthing Bank.
Aftermath
The merger created one of Iceland's largest banking institutions and provided a platform for further international expansion.
Sources2 sources
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