Moody's Investors Service has today downgraded Kaupthing Bank's credit ratings. The Bank's long-term deposit and senior debt ratings in local and foreign currencies have been downgraded one notch from Aa3 to A1 and the Bank's Financial Strength Rating from C to C-. The Bank's rating for short-term obligations in local and foreign currencies, P-1, which is the highest short-term rating given by Moody's, remains unchanged. The outlook on all ratings is stable. According to Moody's, Kaupthing's recurring earnings power and capital adequacy weakened in 2007 from previously strong levels, and the Bank's business model remains reliant on investment banking and capital markets activities, both of which Moody's expects to prove challenging over the coming years. The adverse shift in market conditions may put downward pressure on the Bank's capital adequacy assuming moderate asset growth. Moody's notes that Kaupthing's liquidity profile and cash position is strong, and the announced asset sale by Kaupthing Singer & Friedlander is also viewed positively in terms of liquidity. Even though the rating agency expresses concerns with regard to asset quality, it notes that it has conducted several stress tests on Kaupthing's loan portfolio, subjecting it among other things to different defaults, which showed that Kaupthing can withstand substantial downward pressure. See link below: http://www.kaupthing.com/Investors/Ratings/Moody's Further information: Gudni Adalsteinsson - Chief Treasurer, + 354 444-6126 Jónas Sigurgeirsson - Chief Communications Officer, +354 444-6112