Icelandic banks started experiencing increasing problems raising funds in international capital markets in 2006 and hit on the thought of establishing Internet banks in Europe. The European financial passport made that simple to accomplish, and the rating agencies favoured the move, see e.g. the Moody’s (2006) report.
As I explain in greater depth in CEPR Policy Insight No. 44, there are essentially two ways a bank can do that, by a branch or subsidiary. Landsbanki opted to create branches, beneath the name of Icesave, supervised and insured from Iceland. They offered above-market interest levels, starting in October 2006, eventually amassing £4.5 billion in the united kingdom. This may have already been done initially with the encouragement of the united kingdom FSA, being concerned about the funding position of Landsbanki.
In 2008, the FSA became concerned and applied increasing pressure on Landsbanki to limit deposits, to which it responded by needs to raise deposits in holland in-may 2008, eventually collecting €1.7 billion there.