Landsbanki had positioned itself as Iceland's primary provider of general and specialized financial services to individuals, corporate entities, and institutions.
It started to expand overseas in 2000 through a number of acquisitions and organic growth, the expansion would lead to the creation of its Icesave subsidiary in 2006 which would ultimately seal its fate.
In establishing Landsbanki, the Icelandic parliament hoped to boost monetary transactions and encourage the country's nascent industries.
Following its opening on 1 July 1886, the bank's first decades of operation were restricted by its limited financial capacity; it was little more than a savings and loan society.
Following the turn of the 20th century, however, Icelandic society progressed and prospered as industrialization finally made inroads, and the bank grew and developed in parallel to the nation.
Liberalisation of financial services, beginning in 1986, opened up new opportunities, which the bank managed to take advantage of despite some economic adversity.
These subsidiaries dealt in securities and prepared equity research in London, Paris, Frankfurt, Zürich, Nyon (25 km from Geneva), Milan, Madrid and Amsterdam.
The acquisition of Bridgewell made Landsbanki the second largest broker to listed companies on the London Stock Exchange measured by the number of clients.
As a result, Icesave quickly became the market leader in Internet deposit savings accounts in the UK in terms of interest rates.
[5] The country's financial regulator said on Tuesday that Landsbanki's branches would open as usual and that all “domestic deposits” were fully guaranteed.
The next day the United Kingdom Chancellor of the Exchequer Alistair Darling announced that his government would foot the entire bill for British Icesave savers, estimated at £4 billion,[6][7] 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.
The combined deposit repayment claims from retail Icesave customers in the Netherlands and Great Britain (including both the minimum depositor guarantees and the deposit values in excess of the Icelandic guarantee), were at first hand covered respectively by the UK Financial Services Compensation Scheme (FSCS) and by De Nederlandsche Bank (DNB), due to the inability/unwillingness for other Icelandic stakeholders to step in and ensure/guarantee immediate coverage for these claims.
On 28 October 2011, the Supreme Court of Iceland ruled, that the UK FSCS and the Dutch DNB combined deposit repayments of respectively ISK 852.1bn (£4.459bn) and ISK 282.3bn (€1.668bn) should be repaid by the Landsbanki receivership as "priority claims" pursuant to Article 112 of "Act No.21/1991 on Bankruptcy", and noted these mentioned figures included contractual interest rates for the UK part and some extra penalty interest rates (6%) for the Dutch part for the period from 8 October 2008 until 22 April 2009.
[15][16] According to the latest evaluation of the planned recovery of asset values, it is expected all "Priority claims" will have been fully repaid by the end of 2017.
Moreover, it was believed the creditors had no legal right to claim compensation towards the Landsbanki receivership for any potential losses they may suffer, because of exchange rate fluctuations after 22 April 2009.
Experts from IMF however belief, that any potentially saved money from a negotiated deal, would be eaten up by the additional costs the government will need to pay in the short term, for implementing the abolishment of capital controls.
[28][29] In that regard, it shall be noted that all of the first 4 repayment tranches repaid by the Landsbanki Receivership were exempted from this amended law, because it only involved available cash stemming from liquidation conducted ahead of 12 March 2012.
[15] All future repayment tranches will however be impacted by the amended law, which stipulates that the Icelandic minister of finance and minister of banking have to agree on exemptions granted by the Icelandic Central Bank for all future claim repayments stemming from companies with a larger balance sheet than ISK 400bn, even if it only involves a transfer of foreign currency.
[30] Another new repayment restriction under consideration is that the Icelandic government on 1 October 2013 presented a proposal for their 2014 budget law, to include a new 0.145% tax on all transfers from estates of failed financial companies.