Wounded Iceland takes over top bank

By Omar Valdimarsson

REYKJAVIK (Reuters) - Iceland took over its second largest bank, propped up a battered currency and sought on Tuesday a 4 billion euro (3.1 billion pound) loan from Russia to help tackle a crisis threatening to overwhelm the island nation.

Russian Finance Minister Alexei Kudrin said Moscow viewed positively the request from Iceland, whose premier said it had faced a risk of "national bankruptcy."

"The result will be announced after negotiations," Kudrin said.

Prime Minister Geir Haarde said Icelandic officials would travel to Moscow on Tuesday or Wednesday to discuss terms for the loan to bolster the country's foreign reserves.

"With this, like everything else, nothing is certain until it's certain," Haarde told a news conference.

He said Iceland would not default on its sovereign debt.

Home to just 300,000 people, Iceland used emergency powers rushed through on Monday to dismiss the board of directors of Landsbanki and put the bank in receivership.

That tipped the country's crown currency into a 35 percent nosedive although it later recovered some ground.