Iceland's biggest bank got an emergency loan from Sweden and Britain said it would guarantee deposits in an online unit of another of its banks as the financial crisis engulfing the tiny Nordic nation showed no sign of easing up.
In recent days, Iceland's government has taken over the country's second-biggest bank, fixed the exchange rate of its plummeting currency, and asked Russia for a euro 4 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 USD 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 the government would guarantee deposits of British savers with Icesave, the online arm of Landsbanki, the bank nationalised by the Icelandic government yesterday.
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.