“Due to the current instability in the financial markets Kaupthing Bank and NIBC have determined not to proceed with the announced acquisition of NIBC by Kaupthing Bank. Relevant regulatory submissions have been withdrawn and the share purchase agreement has been terminated,” both groups announced last Wednesday.

According to Times Online, the consortium had not received the go-ahead for the deal from the Icelandic financial supervisory authority. The Dutch group, which faced heavy losses from the US sub-prime crisis posted in 2007 a 235 million euro-profit after tax from continuing operations, 1% higher than previous year.

“Instability in the financial markets has resulted in a turbulent year for the banking industry, including ourselves. Together with Kaupthing we agreed that the current market conditions bring the benefits of the acquisition under pressure and don't form a solid base on which to build a combined future,” said Michael Enthoven, Chairman of the Managing Board of NIBC. Mr. Enthoven and Jurgen Stegmann, Chief Risk Officer at NIBC Holding and NIBC Bank resigned from their respective positions.

With this deal drop the Icelandic group steps out of the Dutch market. This may therefore impact the activities of its Luxembourg branch. “The current activities of Kaupthing Bank Luxembourg were and are not depending on the acquisition of NIBC by our Parent Bank. However as I said the acquisition would have been important for us to provide Private Banking activities into new markets where NIBC is active, especially in the Netherlands, as NIBC do not have any private banking and assets management experience. The cancellation of the acquisition means simply that we keep on doing our business in Luxembourg and support our Kaupthing Branch in Belgium, which we bought recently from Robeco Bank. Kaupthing Bank Luxembourg counts for approximately 8% of the group profitability as previous years,” Magnus Gudmundsson, the CEO of the Islandic Bank in Luxembourg.