Sweden and Britain intervene in Iceland crisis
REYKJAVIK, Iceland -- Iceland's biggest bank received an emergency loan from Sweden and Britain said it would guarantee deposits in an online unit owned by another of its banks as the financial crisis engulfing the tiny Nordic nation showed no sign of easing up.
In recent days, Iceland has taken over the country's second-biggest bank, fixed the exchange rate of its plummeting currency, and asked Russia for a euro4 billion loan as it scrambles to stop the collapse of its economy.
It has also introduced emergency laws that give the government sweeping new powers to take over companies, limit the authority of boards, and call shareholder meetings.
A day after Prime Minister Geir H. Haarde publicly criticised the lack of assistance Iceland has received from Europe, Sweden said it would grant liquidity assistance to the Swedish arm of Icelandic bank Kaupthing with a loan of up to 5 billion crowns, or $702 million.
The central bank said that it believed that Kaupthing was solvent, but was suffering temporary liquidity problems that could have wider repercussions.
"To safeguard financial stability in Sweden and ensure the smooth functioning of the financial markets, the Riksbank has therefore decided to grant liquidity assistance to Kaupthing Sverige," it said in a statement.
In Britain, Treasury chief Alistair Darling said that deposits of British savers with Icesave, the online arm of Landsbanki, the bank nationalized by the Icelandic government on Tuesday.
Icesave had stopped customers, including thousands in Britain, from withdrawing money from their accounts and British regulators have said that it is likely to file for bankruptcy.
Bolstering the British support, savings bank ING Direct UK said it is buying more than 3 billion pounds, or $5.3 billion of deposits held by around 180,000 British savers with two other Icelandic-owned banks, Kaupthing Edge and Heritable Bank, which is owned by Landsbanki.
The intervention of the British and Swedish authorities underscores the effect that a full-blown collapse of Iceland's financial system would have on the rest of Europe, given the heavy investment by Icelandic banks and companies across the continent.
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