Kaupthing is the third Icelandic bank to fall foul of the credit crunch.
Icelandic bank Kaupthing has become the latest bank to come under the control of the country's government.
The Financial Supervisory Authority has taken over the bank in a bid to protect both the country's banking system and depositors' money. This follows the recent nationalisation of Landsbanki and Glitnir.
As Iceland's largest lender, the bank had 160,000 UK customers with deposits totalling £2.5 billion held with its online arm, Kaupthing Edge. However, the UK Treasury arranged for all UK depositors' funds to be taken over by ING Direct earlier in the week.
Kaupthing's executive chairman, Sigurdur Einarsson, has blamed the collapse of the bank on the government's decision to buy a 75 percent stake in Glitnir and suggested that the company was recording positive results as recently as September 29th.
He said: "This triggered a series of events which nobody predicted or was able to control.
"Credit rating agencies downgraded their credit ratings for the Icelandic state and the Icelandic banks, and foreign investors unleashed a landslide in which they tried to get rid of Icelandic assets, regardless of how solid they were."
Meanwhile, trading has been suspended on the OMX Nordic Exchange for two days in a bid to prevent further problems. The exchange will reopen on Monday.
