Kaupthing was nationalised in 2008

The former chief executive of the collapsed Icelandic bank Kaupthing has been arrested, authorities say.

Hreidar Mar Sigurdsson is suspected of embezzlement, trading irregularities, and other breaches of banking laws, the special prosecutor's office has said.

It is the first high-profile arrest since the country's financial collapse in 2008.

Mr Sigurdsson is being held by police until a bail hearing on Friday at the Reykjavik District Court.

Kaupthing, once Iceland's biggest bank, collapsed under a mountain of debt at the height of the country's banking crisis.

It was taken over by the government in October 2008, along with Iceland's two other biggest banks, Landsbanki and Glitnir.

Prosecutor Olafur Hauksson said Mr Sigurdsson was suspected of falsifying documents, embezzlement, breach of trading laws, market manipulation, and other laws.

Mr Hauksson was appointed by Iceland's post-crisis government to investigate any criminal activity in the lead up to the crash that has crippled Iceland's economy.

Britain's Serious Fraud Office is carrying out its own investigation into suspected fraud at Kaupthing, with a focus on the bank's efforts to attract British investors to its "high yield" deposit account, Kaupthing Edge.