Tensions between Britain and Iceland soared Thursday night after the nationalisation of the Nordic country’s largest banks put close to £800m of local authority money at risk and prompted Gordon Brown to threaten to seize the assets of Icelandic companies. On Thursday, Iceland was forced to nationalise Kaupthing, its biggest and last major bank, a move that Geir Haarde, prime minister, blamed partly on the actions of the UK government. Haarde also criticised the UK for using anti-terror laws to freeze £4bn of bank assets. The unprecedented move – slammed by legal experts as a distortion of the law’s intent – was used to protect the deposits of British account holders. The action took place on Wednesday to freeze assets of Iceland’s second-biggest bank, Landsbanki, which went into receivership this week. Meanwhile, the impact of the Icelandic banking crisis continued to jolt the British corporate world. Baugur, the Icelandic retail group, was on Thursday trying to find out the fate of its holdings in British retailers (see separate post). Kaupthing and Landsbanki are two of its financial backers. Iceland’s stock exchange on Thursday suspended all trading after Kaupthing joined Landsbanki and Glitnir in enforced nationalisation.
