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WORLD> Europe
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Iceland suspends stock trading, creates new bank
(Agencies)
Updated: 2008-10-09 23:02 The newly wealthy banking sector provided financing for a number of business deals across Europe. Kaupthing alone racked up debts of more than US$5.25 billion in five years to help fund British deals. When liquidity markets dried up around the world, they struggled to refinance those heavy debts. Haarde said on Wednesday that the banking sector had "become too big" as he acknowledged that it will take the tiny Nordic nation of just 320,000 people several years to recover from the current crisis. Glitnir, the country's third largest bank, said on Thursday that it had received liquidity support from the Norwegian Banks' Guarantee Fund of 5 billion Norwegian crowns (US$820,000) for its Norwegian unit. It added that the sale of the unit had begun. Glitnir's move into receivership on Wednesday was a sign that troubles at the bank were larger than the government thought when it announced less than two weeks ago that it would nationalize the bank - the switch into receivership gives Glitnir temporary protection from its debt obligations. In urgent moves to downsize the overgrown banking sector, the Financial Services Authority immediately began to restructure the bank, saying it would sell its Finnish and Swedish businesses. Similarly, Iceland's central bank had already loaned euro500 million (US$680 million) to Kaupthing earlier this week while the Swedish central bank had provided a loan of up to 5 billion crowns ($702 million). Those measures proved not to be enough in a rapidly deteriorating situation. |
