Iceland takes over biggest bank

By Brett Young

REYKJAVIK (Reuters) - Iceland seized control of its biggest bank on Thursday and halted all trade on its stock market as the prime minister urged people to remain calm in the face of a financial meltdown.

By taking hold of Kaupthing, the government of the north Atlantic island has now grabbed three of its biggest banks this week with Landsbanki and Glitnir also put in state hands.

As the crisis deepened, the stock exchange suspended trading in all shares and said business would not resume until Monday.

Prime Minister Geir Haarde told a news conference the country had not decided on whether to seek help from the International Monetary Fund (IMF).

Negotiations to secure a 4 billion euro (3.17 billion pounds) loan from Russia will begin next Tuesday. Use of swap lines set up with Nordic central banks was a last resort, Haarde said.

He urged savers not to withdraw large sums of money from banks, saying it would make the situation more difficult.

"I want to emphasise...that people remain calm and understand that the transaction system is fully functioning and deposits are safe," he said.

The prime minister said he had spoken to British finance minister Alistair Darling, who had assured him that transactions between the two countries would return to normal.