(UPDADTED 26 November) The office of Iceland’s Special Prosecutor into the banking crisis yesterday carried out searches at the headquarters of Byr savings bank and MP Bank.

The issue concerns the purchase, by a holding company called Exeter, of shares in Byr at a time in autumn 2008 when share dealing in Icelandic banks was officially suspended.

Exeter is accused of purchasing the shares from MP Bank and certain employees of Byr – funded by a special unsecured loan from Byr itself.

Yesterday’s searches went ahead with permission from the Reykjavik District Court. The searches involved most of the Special Prosecutor’s 22 staff as well as specialist police officers, and took all day.

RUV sources revealed as early as this April that a company called Arkea took a billion kronur loan from Byr in October and December 2008 which it then transferred to daughter company Exeter Holdings and used to buy Byr shares from MP Bank. Three Byr staff members at the time told RUV that Exeter was actually owned by MP Bank.

The FME, Iceland’s financial regulator, had been investigating the case before recently transferring it on to the Special Prosecutor.

UPDATE: Ragnar Z: Gudjonsson, head of Byr, has left his post. He says he did this to make life easier for the savings bank and its staff, but that he has never broken the law in the course of his work. He says he is confident investigations will prove this.