WORLD> Europe
Iceland gives up currency defence, seizes 2nd bank
(Agencies)
Updated: 2008-10-09 10:26

Now facing financial meltdown, Iceland has taken over two of its largest banks, first Landsbanki on Tuesday and then Glitnir on Wednesday, and has had to go cap in hand to other nations.

The headquarters of Iceland's Kaupthing Bank is seen in downtown Reykjavik October 8, 2008. Iceland's fast-moving financial crisis deepened on Wednesday as Kaupthing was forced to take an emergency loan from Sweden and the government seized control of another large bank it had planned to prop up. [Agencies]

"We will do whatever it takes to protect our interests," Haarde said. "We will seek help if needed."

Later, speaking in a joint interview with news agencies, he sounded a contrite note after what has been a harrowing few days for the country.

"What we have learned from this whole exercise over the last few years is that it is not wise for a small country to try to take a leading role in international banking."

Journalists have descended on Iceland in large numbers to report the saga, with reporters and camera crews outnumbering customers at some bank branches.

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"The situation is rather serious and quite scary and we just have to let these days pass and hope for the best," Sveinn Andri Sveinsson, a 45-year-old lawyer, told Reuters.

The financial regulator said Glitnir's operations in Iceland would be open for business as usual and domestic deposits were guaranteed. Glitnir said it would sell its Swedish unit and its Finnish arm was also up for grabs.

Meanwhile, ING Direct, the online banking arm of ING Group, said it was acquiring more than 3 billion pounds ($5.3 billion) of British deposits from Icelandic online savings providers IceSave, owned by Landsbanki, and Kaupthing Edge.

But tension between Iceland and Britain emerged because savers of Icelandic banks in Britain have been put at risk.

"We are taking legal action against the Icelandic authorities," British Prime Minister Gordon Brown told a news conference, as he announced the UK's own bank bailout.

The British Treasury said a Kaupthing unit in Britain had been put into administration to protect retail depositors, while Haarde said the two countries would review the situation for Icesave. He said there was a good chance Landsbanki's assets would cover the deposits of British savers in Icesave.

Haarde said Iceland was determined not to let the crisis overshadow its friendship with Britain.

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