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Kaupthing Singer & Friedlander Limited (KSF), a UK subsidiary of Iceland’s largest bank, faced significant challenges during the 2008 financial crisis, which culminated in its impending failure. As banks globally were collapsing, KSF was on the brink of insolvency, prompting the Financial Authority (FSA) to appoint EY as administrators. The primary objective was to ensure a smooth transfer of KSF’s retail internet-based deposits to ING Bank while managing the administration of the bank’s remaining operations and maximizing returns for creditors, who had claims totaling over £4 billion (US$6 billion). The administration process was complex, requiring EY to migrate 170,000 internet depositors to ING Bank within six months, while also addressing the needs of an additional 3,000 depositors and managing loan books worth approximately £3 billion (US$4.5 billion). EY's strategy involved stabilizing KSF’s operations to maintain depositor confidence and prevent a run on other banks. This required meticulous attention to detail and a long-term perspective to identify potential value in the bank’s assets. To address immediate operational challenges, EY quickly stabilized KSF’s banking platforms and accounting systems, which were in transition at the time of administration. The team leveraged cross-functional expertise to implement new systems that would enhance operational efficiency. Throughout the administration, EY provided ongoing leadership and support, ensuring that the bank's loan management team was equipped to handle the complexities of the situation. Effective communication was crucial in maintaining public confidence. EY collaborated closely with the Financial Compensation Scheme (FSCS) to ensure that depositors were informed and that the transfer of funds was executed smoothly. This collaboration resulted in the successful transfer of internet depositors to ING Bank within four months of EY’s appointment, while the validation of remaining deposits took additional months, ultimately protecting the savings of 2,000 non-internet-based retail and SME depositors. In terms of long-term strategy, EY implemented a loan run-off strategy for KSF’s loan book and restructured its asset finance businesses, which were sold for a premium three years into the administration. By maintaining regular communication with creditors and leveraging a wide range of expertise from across EY, the administrators were able to reassure stakeholders and achieve a recovery rate of 86.8 pence in the pound for creditors. The lessons learned from the KSF administration contributed to the development of a more robust banking regulatory framework in the UK, influencing regulations that require banks to have recovery and resolution plans. This experience has positioned banks to better withstand future crises, including the disruptions caused by the COVID-19 pandemic, thereby enhancing the overall resilience of the banking sector.

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