The island of Iceland is at the center of the world's financial global crisis, and might be the first "national bankruptcy" to follow in the steps of the credit crunch. Iceland has already seen the failure of its' second largest bank Landsbanki Island HF. The failure of Landsbanki has prompted the British government to step in to money/savings/2008/10/08/kaupthing-savings-bought-by-ing-direct.aspx">protect its' citizen's savings accounts. ING Direct UK has picked up a number of affected accounts.

The UK arm of Netherlands-based ING Group, ING Direct UK, has acquired £3bn worth of savings accounts from two Icelandic banks -- Kaupthing Edge, the UK arm of Kaupthing Bank, and Heritable Bank, owned by Landsbanki. 
Landsbanki folded yesterday and Kaupthing is in deep trouble this morning. Chancellor Alistair Darling told the House of Commons at lunchtime that the savings accounts operated by Heritable Bank and Kaupthing Edge in the UK have been transferred to ING Direct. This should be welcome news for savers as the credit swap rates for ING suggest that the Dutch bank appears to
be safe. Savers with Kaupthing no longer need fret about whether their bank is about to go under.

The United Kingdom plans on suing Iceland over the deposits, in a sign of how ugly things could quickly become for Iceland.

Gordon Brown vowed to protect Britons threatened with losing their savings in UK operations of stricken Icelandic banks by announcing he would sue Reykjavik to recover the money.
In a news conference today, Brown pledged legal action against the Icelandic government for refusing to honour its obligations after Icesave, an online British arm of Iceland's second biggest bank Landsbanki, was frozen yesterday.

This will come as welcome news to any Brit who had a savings account with Icesave or Kaupthing. They initially had been told that recovery of their money could have taken months. For those who need the money today, that's hardly a plausible solution.

Icesave had been aggressively signing up British savers who were attracted by the company's 7% interest rate. The deregulation of banking in Iceland in the 1990s is cited for the growth of Iceland's economy from that point forward. At the beginning of deregulation, there were one of the poorest countries in Europe. At the beginning of this year, they were onsidered to be one of the wealthiest. Now that is changing rapidly as the country is on the "brink of bankruptcy."

Geir Haarde , prime minister of Iceland said, in remarks on television yesterday, that the country faces a possible "national bankruptcy" due to the current crisis.

Since the financial sector in Iceland completely dwarves the rest of the country's economy, it's unlikely to think Iceland will fare well in coming months.

The financial meltdown has already destroyed the wealth of two of Iceland's richest men.

Bjorgolfur Bjorgolfsson, known as Thor, and his father, Bjorgolfur Gudmundsson, were Iceland's only two billionaires in March. Both held substantial stakes in the Landsbanki Island HF, which have clearly lost most of their value.

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