Reykjavik - The Icelandic Financial Supervisory Authority
took over the operations of the Landsbanki bank on Tuesday under the
provisions of emergency laws passed late Monday, as Russia offered
the country a massive loan to aid its ailing economy.
The agency said the Landisbanki's domestic deposits were 'fully
guaranteed' in accordance with a previous government statement.
The bank's operations were to be open for business 'as usual,' the
agency added.
Separately, Russia has offered Iceland a loan of over 4 billion
euros (5.4 billion dollars) over four years, the Icelandic national
bank said on Tuesday. Russia has plentiful foreign reserves as a
result of several years of record oil prices.
Late Monday, the Icelandic government, backed by opposition
parties, adopted an 'emergency law' to reorganize its financial
system that has been severely battered.
Prime Minister Geir Haarde said in a televised speech to the
nation that the bank crisis also posed a national threat.
'There is a very real danger, fellow citizens, that the Icelandic
economy, in the worst case, could be sucked with the banks into the
whirlpool and the result could be national bankruptcy,' he said.
The new legislation was to 'adapt the banking system to Icelandic
circumstances and rebuild the trust of foreign operators in Icelandic
banking and financial operations,' Haarde said.
The commercial banks in the North Atlantic nation of 300,000
people have rapidly expanded their operations in recent years, and
'their liabilities are now equivalent to many times Iceland's GNP,'
Haarde added.
Under the special powers, he said the government 'aimed for the
sale by Icelandic banks of foreign assets and a reduced presence
abroad, so that the Icelandic state, so small in comparison with the
Icelandic banks, would have the capacity to support them.'
The measures came after the Icelandic Financial Supervisory
Authority on Monday said it was temporarily suspending trading of
shares and other financial instruments issued by several banks
including Glitnir bank, Kaupthing bank and Landsbanki.
Haarde said the government would 'fully' cover all deposits in
domestic commercial and savings banks.
The nation's largest bank Kaupthing said over the weekend its
finances were healthy.
A week ago, the government of Iceland bought a majority stake in
Glitnir bank.
The government paid 600 million euros (877 million dollars) for a
75-per-cent stake in Glitnir, saying the move was aimed at
strengthening Glitnir's capital ratio and liquidity.
The Icelandic currency, which came under attack from speculators
earlier this year, has dropped in value compared to the euro and the
dollar, with the country suffering from some 15-per-cent inflation.
USA
Your Talkback on this Story