Iceland’s banking system close to melting

After Iceland puts two of its largest banks into the hands of financial regulators, the government is rapidly seeking options to prevent the whole system from complete collapse.

One of the main solutions is to secure a four billion euro loan from Russia but the country’s Prime Minister, Geir Haarde, said he was still pursuing all avenues.

Iceland’s banking system is buckling under the weight of debts equal to 12 times the size of the economy. Its banks, which account for most of the country’s stock exchange, have 80% of their assets in foreign holdings. It means Iceland has become critically exposed to the worldwide financial crisis.

Anger at the pain being felt by its 300,000 citizens brought some of them out onto the streets in protest.

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