Landsbanki
A historic Icelandic commercial bank whose international expansion and Icesave subsidiary became central to the 2008 Icelandic banking collapse.
Last updated October 14, 2026
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Overview
Landsbanki, formally Landsbanki Íslands and also known as Landsbankinn, was one of Iceland’s oldest and largest commercial banks. It began operations in 1885, when Iceland’s parliament sought to improve monetary circulation and provide financing for the country’s emerging industries. Initially its resources were limited and its activities resembled those of a savings and lending institution, but it expanded alongside Iceland’s industrialization and economic development. By the 1920s it had become the country’s largest bank and was responsible for issuing banknotes. From 1927 until 1961, Landsbanki performed the note-issuing role that preceded the establishment of the Central Bank of Iceland. This role did not make it a modern central bank in the full monetary-policy sense, but it gave the institution an important position in Iceland’s financial system. After banknote issuance moved to the Central Bank, Landsbanki continued as a commercial institution, building a broad domestic branch network and serving households, businesses and public or institutional customers. It was involved in a state-directed merger with Samvinnubanki and remained publicly owned for much of the twentieth century. Financial liberalization beginning in the 1980s created opportunities for more aggressive competition and international growth. Landsbanki was incorporated as a limited-liability company in 1997, and the state completed its privatization in stages between 1998 and 2003. The newly private bank pursued overseas acquisitions and developed activities in investment banking, securities brokerage, structured finance, commercial finance, derivatives, equity research, fixed income and wealth management. It acquired London-based Heritable Bank in 2000 and later expanded its securities operations through acquisitions including Teather & Greenwood, Kepler Capital Markets, Merrion Capital Group and Bridgewell. At home, Landsbanki remained a major provider of general and specialized financial services. At the end of 2006 it reportedly supplied close to 40 percent of Icelandic corporate lending and was a principal banking relationship for a substantial majority of companies listed on the OMX Iceland Stock Exchange. Before its collapse, it operated about 40 branches and sub-branches, giving it the country’s most extensive branch network. Its balance sheet grew rapidly during the years preceding the global financial crisis; reported assets reached ISK 3,058 billion in December 2007, while its market capitalization was reported at ISK 383 billion. The bank’s international funding model was especially exposed to the crisis. In October 2006 it launched Icesave, an internet savings brand aimed initially at United Kingdom customers and later also at the Netherlands. Icesave attracted deposits rapidly by offering highly competitive interest rates. By March 2007 it had more than 80,000 UK accounts and deposits of approximately £2.8 billion. The rapid growth of these foreign deposits increased Landsbanki’s dependence on wholesale and cross-border funding at a time when Icelandic banks had become very large relative to the domestic economy. On 7 October 2008, amid the Icelandic financial crisis, the Icelandic Financial Supervisory Authority took control of Landsbanki. Its domestic operations were separated into Nýi Landsbanki, or New Landsbanki, while the remaining estate entered failure and winding-up proceedings. Icesave stopped processing deposits and withdrawals and was declared in default on 8 October. The failure generated a major dispute involving Iceland, the United Kingdom and the Netherlands over compensation for depositors and the obligations of national deposit-guarantee systems. The UK government froze Landsbanki-related assets under emergency financial-sanctions legislation and initially funded compensation for UK Icesave customers. The old Landsbanki thereafter existed principally as a receivership and liquidation estate rather than as a continuing banking business. Icelandic courts and the EFTA Court addressed the priority of depositor claims and whether Iceland itself had an obligation to guarantee foreign depositors. The EFTA Court cleared Iceland of the specific state-liability claims in 2013, while the Landsbanki estate remained responsible for eligible priority claims to the extent supported by recoveries from its assets. The institution is therefore best understood as a failed historic bank whose domestic franchise was transferred to a successor bank and whose international estate was liquidated after the crisis.
History
Landsbanki was established in the nineteenth century as part of Iceland’s effort to create a more capable national financial system. It opened for business in 1886 after being founded in 1885, with a mandate closely connected to the development of commerce, monetary transactions and domestic industry. Its early scale was modest, but economic modernization after the turn of the century enabled the bank to expand. In the 1920s it became Iceland’s largest bank and assumed responsibility for issuing banknotes. The bank retained this monetary role until 1961, when the Central Bank of Iceland was established and took over note issuance. Landsbanki then concentrated on commercial banking. It broadened its branch network, served households and companies, and participated in the consolidation of Iceland’s state-owned banking system, including a state-directed merger with Samvinnubanki. Liberalization of financial services from 1986 onward changed the competitive environment and allowed Landsbanki to develop more commercial and international activities. In 1997 the institution became a limited-liability company. The government subsequently privatized it in stages, with the process completed in 2003. Under private ownership, management pursued expansion beyond Iceland, arguing that the small domestic market required geographic and product diversification. Heritable Bank in London was acquired in 2000. In 2005 Landsbanki acquired or invested in several European securities businesses, including Teather & Greenwood, Kepler Capital Markets and Merrion Capital Group. It also maintained operations in locations such as London, Amsterdam, Luxembourg and continental European financial centers, covering brokerage, research, structured finance, commercial lending and wealth management. The bank’s growth culminated in a highly leveraged cross-border model. The Icesave brand, launched in the United Kingdom in October 2006, collected retail internet deposits by offering attractive interest rates. It expanded to the Netherlands in 2008. Icesave’s deposits increased quickly, but the model became unsustainable when international credit markets froze and Icelandic banks could no longer refinance their liabilities. Landsbanki’s reported assets in December 2007 were several times the size of Iceland’s domestic economy, illustrating the systemic scale of the institution’s expansion. On 7 October 2008 the Icelandic Financial Supervisory Authority took control of Landsbanki. The domestic business was transferred to Nýi Landsbanki, while the failed institution’s foreign operations and liabilities proceeded through a receivership. Icesave ceased normal service and entered default shortly afterward. The collapse produced political, legal and diplomatic conflict between Iceland, the United Kingdom and the Netherlands concerning depositor compensation. The UK froze relevant assets and its compensation scheme, together with the Dutch authorities, made payments to eligible depositors. Subsequent Icelandic court proceedings treated the UK and Dutch compensation claims as priority claims against the Landsbanki estate. In 2013 the EFTA Court rejected the argument that Icelandic taxpayers were required to settle the claims as a direct state debt, but this did not eliminate the claims against the receivership. The estate continued liquidating assets and making distributions. The former bank’s story consequently has two distinct endpoints: its domestic banking business continued through a successor institution, while the original Landsbanki brand became associated with the failed estate, Icesave and the wider Icelandic financial crisis.
- 2013
EFTA Court ruling in Icesave dispute
[1]The court cleared Iceland of the asserted state obligation to reimburse the UK and Netherlands, while claims against the Landsbanki estate remained relevant.
- 2008
Taken into regulatory control
[1]The Icelandic Financial Supervisory Authority took control of Landsbanki on 7 October during the financial crisis.
- 2008
Domestic operations transferred to Nýi Landsbanki
[1]The domestic branch, ATM, call-center and internet operations were separated into New Landsbanki.
- 2007
Acquires Bridgewell
[1]Landsbanki completed its acquisition of UK investment bank Bridgewell, later combining it with Teather & Greenwood under Landsbanki Securities (UK).
- 2006
Icesave launched in the United Kingdom
[1]The bank introduced an internet savings brand aimed at UK retail depositors.
- 2005
Expands European securities platform
[1]Landsbanki acquired European securities businesses including Teather & Greenwood, Kepler Capital Markets and Merrion Capital Group.
- 2003
Privatization completed
[1]The Icelandic state completed the staged privatization of Landsbanki.
- 2000
Acquires Heritable Bank
[1]The acquisition of the London-based bank marked an important step in Landsbanki’s international expansion.
- 1997
Incorporated as a limited-liability company
[1]Landsbanki was reorganized as a limited-liability company ahead of the completion of privatization.
- 1961
Central Bank takes over note issuance
[1]The Central Bank of Iceland replaced Landsbanki in the banknote-issuing role.
Products and positioning
Historically positioned as one of Iceland’s leading full-service banks, combining a nationwide domestic franchise with international investment-banking, securities and structured-finance activities.
Banking
Retail banking
Landsbanki provided deposit, payment and lending services to households through Iceland’s broad branch network and associated remote channels. Domestic retail banking was transferred to the successor Nýi Landsbanki after the 2008 intervention.
Banking
Corporate banking
Corporate banking was a core domestic activity. Before its failure, Landsbanki was reported to provide close to 40 percent of Icelandic corporate lending and maintained relationships with many companies listed on the Icelandic stock exchange.
Online savings · 2006
Icesave
Icesave was an internet savings brand launched in the UK in 2006 and introduced in the Netherlands in 2008. It attracted depositors through highly competitive guaranteed interest rates, grew rapidly, and defaulted during Landsbanki’s collapse.
Investment banking · 2000
Securities and investment banking
Through its international subsidiaries, Landsbanki offered securities brokerage, equity research, mergers and acquisitions advice, derivatives, equity and fixed-income services. The platform included businesses in London, Paris, Dublin and other European financial centers.
Wealth management
Private banking and wealth management
Landsbanki Luxembourg provided private banking, wealth management and corporate services as part of the group’s international operations.
Controversies
2008
Icesave collapse and international deposit dispute
The failure of Landsbanki’s Icesave subsidiary left UK and Dutch depositors dependent on national compensation arrangements and led to a prolonged dispute over whether Iceland or the failed estate should bear the cost. The episode became one of the defining controversies of the Icelandic financial crisis.
Marketing campaigns
- 2005Landsbankadeildin sponsorship
Iceland
Landsbanki sponsored Iceland’s men’s and women’s premier football competitions under an agreement with the Football Association of Iceland. The sponsorship was also directed toward children’s and youth sports, linking the bank’s public image to national football and community development.
Outcome. The league used the Landsbankadeildin name for the agreed four-season period.
Brand decisions
2013
Receivership claims recognized as priority claimsOtherBackground
Courts considered the status of compensation paid by the UK and Dutch authorities to Icesave depositors.
Action taken
The Icelandic Supreme Court ruled that the relevant UK and Dutch claims ranked as priority claims against the Landsbanki receivership, while the EFTA Court separately rejected direct state liability for Iceland.
Aftermath
Repayment continued through liquidation distributions from the estate rather than through a direct taxpayer-funded settlement.
2008
Separation of domestic operations from the failed estateStrategyBackground
Regulatory intervention followed the collapse of Iceland’s overextended banking system and Landsbanki’s inability to meet obligations.
Action taken
The Icelandic Financial Supervisory Authority placed Landsbanki under control and transferred its domestic banking activities to Nýi Landsbanki.
Aftermath
The successor continued domestic banking, while the original Landsbanki entered receivership and liquidation.
2006
Launch of Icesave in the United KingdomProduct launchBackground
Landsbanki sought foreign funding and retail deposits beyond Iceland’s relatively small domestic market.
Action taken
It introduced an online savings account brand offering interest rates designed to be highly attractive to UK savers.
Aftermath
Icesave grew quickly, but its cross-border deposit liabilities became central to Landsbanki’s failure when funding markets froze in 2008.
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