Iceland FSA issues statement on Landsbanki takeover

REYKJAVIK, Oct 7 (Reuters) - Iceland's market authority said on Tuesday it would take control of Landsbanki LAIS.IC, the island's second largest bank by value.

The statement comes after the country's banking minister told Icelandic radio that the bank would be taken over.

"Based on new legislation, the Icelandic Financial Supervisory Authority (IFSA) proceeds to take control of Landsbanki to ensure continued commercial bank operations in Iceland," the authority said in a statement.

"Domestic deposits are fully guaranteed, as declared by the government. Landsbanki's domestic branches, call centres, cash machines and internet operations will be open for business as usual. The objective of the IFSA's action is to guarantee a functioning domestic banking system."

The move is the latest step by authorities to control a crisis in the financial sector that has already led to the part-nationalisation of Glitnir GLB.IC and new legislation to give the govenrment sweeping powers over the banking sector.