Just hours after Geir Haarde, Iceland's prime minister, said on Wednesday night that it was unlikely that the financial regulator would seize Kaupthing, the bank was taken over by the regulator.

Icelandâ??s stock exchange on Thursday suspended trading in all shares citing unusual market conditions.

Sigurdur Einarsson, Kaupthingâ??s executive chairman, said the bank had asked Icelandâ??s Financial Supervisory Authority (FME) to take control after Kaupthing Singer & Friedlander, its UK subsidiary, was placed into administration on Wednesday by the UK government, putting the parent company in technical default.

It also emerged on Thursday that Austria had frozen all the assets of Kaupthingâ??s Austrian subsidiary.