Iceland watchdog probes failed banks -paper

REYKJAVIK, Sept 24 (Reuters) - Iceland's financial regulator is investigating the country's collapsed banks over allegations they may have manipulated markets prior to the economic crash last year, newspaper Morgunbladid said on Thursday.

Sigurdur Valgeirsson, a spokesman for the Financial Supervisory Authority (FME), said the agency would not comment on individual cases being investigated.

Morgunbladid said that the FME was investigating whether Kaupthing, Glitnir and Landsbanki systematically sought to boost their stock prices prior to their demise by sending misleading information to the market.

The three banks collapsed under a mountain of debt in October 2008. (Reporting by Omar Valdimarsson in Reykjavik; Editing by Greg Mahlich)