Iceland made immediate use of new emergency powers over the financial system on Tuesday to nationalise Landsbanki, the country’s second biggest bank, in the government’s biggest intervention so far in the crisis. The government reiterated it was putting the interests of Icelandic savers first as the financial regulator took control. UK depositors in the bank’s Icesave accounts were frozen out of its website while branches in Iceland operated as usual. Geir Haarde, Iceland’s prime minister, said problems facing the “external part of our banking system” must still be resolved but said that Kaupthing, the country’s biggest bank, should survive the liquidity problems that contributed to Landsbanki’s demise as publicly quoted company. The part-nationalisation of Glitnir, the third largest bank, last week was the first government intervention and came after the central bank refused to come up with a loan deal. The government paid €600m ($818m) for a 75% stake. Landsbanki was placed in receivership on Tuesday, giving it protection from creditors while regulators work on a restructuring. Foreign assets are likely to be sold as the company retrenches in its home country.

This entry was posted by Gwen Robinson on Wednesday, October 8th, 2008 at 5:43 and is filed under Capital markets. Tagged with iceland, landsbanki. Edit this entry.