Document Type

Case Study

Case Series

Resolution and Restructuring

JEL Codes

G01, G29


Iceland’s three largest banks—Landsbanki, Kaupthing, and Glitnir—grew rapidly in the 2000s and failed amid depositor runs when they lost access to foreign funding markets at the onset of the Global Financial Crisis. On October 6, 2008, the Icelandic Parliament passed the Emergency Act, and authorities quickly used their new powers to nationalize the three banks. The Ministry of Finance and Economic Affairs (Ministry of Finance) created new versions of the three banks to hold the old banks’ performing domestic assets and all insured domestic deposits, and the prime minister assured all domestic depositors that they would be protected. Nonperforming domestic assets and foreign assets remained in the old banks with senior and subordinated debtors and foreign deposits. Existing shareholders were immediately wiped out. The treatment of stakeholders in the old banks was based on provisional valuations of the assets in the new and old banks, with consulting firms commissioned in November and December 2008 to provide more definitive valuations. After the creation of the new banks, discussions with the creditors of the old banks continued for more than a year as they negotiated the value of assets transferred. On December 15, 2009, the state gave the old banks contingent bonds and equity stakes in the new banks, alongside the state. On December 18, 2009, Icelandic authorities announced the completion of the banks’ restructuring. This case focuses on Landsbanki, then Iceland’s second-largest bank, because it was the first the government put into receivership. A tentative estimation in 2016 found an accumulated net fiscal gain of across all three failed banks, factoring in the book value of the banks at the time. As of year-end 2022, the Icelandic State Treasury held 98.2% of shares in New Landsbanki (Landsbankinn, or NBI) with a book value of roughly USD 2 billion.