UPDATE 1-Icelandic crown, stocks fall after UK press report

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LONDON Feb 11 (Reuters) - The Icelandic crown fell to record lows against the euro and the financials-dominated stock market fell at the open on Monday on a report by UK newspaper The Sunday Times that Iceland's banking system was shaky and savers should limit their investments.

The crown was trading around 99.18 to the euro at 1217 GMT, around 0.7 percent weaker on the day.

Iceland's stock market was down 2.9 percent to hit its lowest level since late 2005 .OMXI15.

The Sunday Times said savers should not put more than 35,000 pounds ($68,240) in Icesave, owned by Icelandic bank Landsbanki LAIS.IC, or Kaupthing Edge, owned by Kaupthing KAUP.IC, as this is the maximum guaranteed by UK and Icelandic authorities, the Sunday Times said.

"The Sunday Times story is what made people nervous this morning...it was nothing new really, just saying that people should be careful," said Beat Siegenthaler, emerging markets strategist at TD Securities.

Kaupthing head of communications Jonas Sigurgeirsson said the article recommended not placing more than 35,000 pounds in any bank.

In terms of worries over the bank's ability to service debts, Sigurgeirsson told Reuters: "Kaupthing has liquidity for 440 days. Kaupthing is one of the most liquid banks out there."

Hjordis Isabella Kvaran, investor relations at Landsbanki, said: "Despite the negative coverage in the media about Icelandic banks' savings programmes, this has not had much impact on the Icesave account."

"We are actually seeing an increase in the opening of accounts, rather than what you might expect given the negative market sentiment."

She said 175,000 Icesave accounts had been opened since the product was launched.

The two online accounts have been attracting UK retail savers with interest rates more than 100 basis points higher than the Bank of England's 5.25 percent base rate.

Worries about Iceland's banking system have hit Icelandic markets in the past few months and analysts said the Sunday Times report contributed to the crown's fall on Monday to record lows against the euro EURISK=.

Kaupthing shares were down 2.5 percent, Landsbanki 2.3 percent and Glitnir GLB.IC, a third major bank, was down 4.2 percent.

The cost of insuring against the risk that Iceland's banks would default on their debt increased on Monday.

Five-year credit default swap spreads for Kaupthing widened 20 basis points from Friday to 500/525 basis points, Glitnir CDS's were 10 basis points wider at 555/75, and Landsbanki widened 5-10 basis points to 255/55, according to a trader. (Reporting by Carolyn Cohn and Toni Vorobyova; editing by Tony Austin)