Crisis-hit Iceland plans more financial talks

By Omar Valdimarsson

REYKJAVIK (Reuters) - Iceland's government, scrambling to avert a full-fledged market meltdown, planned further talks on Monday after working through the weekend to produce a package of financial stability measures.

The country's prime minister told state television late Sunday night the country's authorities had not agreed any specific crisis measures "at this time".

He said banks had agreed to sell off overseas assets and the government would meet with pension funds on Monday.

The country's banking minister told state radio on Monday that the drafting of a plan to help the financial system was "well under way".

Commerce and Banking Minister Bjorgvin Sigurdsson said it was impossible to give further information.

The chief executive of Iceland's stock exchange said the bourse would open on Monday, Icelandic radio reported. But Thordur Fridjonsson said the exchange was holding a meeting to decide if shares in the island's banking groups would be traded.

Iceland, hoping to bring home desperately needed foreign currency, has asked pension funds to repatriate cash. The overseas market in the crown has dried up and banks outside the island were quoting rates for the currency on Friday some 7-8 percent lower than local rates.

Icelandic state radio reported over the weekend that the country's association of pension funds had agreed to transfer 200 billion Icelandic crowns ($1.8 billion) to the state.

The transfer will have to be approved by member pension funds and the money must be guaranteed by the state.

Another option for cash would be to activate a Nordic swap facility that was set up earlier this year. A spokesman for Sweden's central bank said the Riksbank had not been asked by Iceland about using the swap. Norway's central bank declined to comment.

DECREASING ACTIVITY

Iceland's financial system has been rocked by the international credit crisis and the state has already been forced to rescue one bank -- Glitnir.

Credit agencies have cut Iceland's sovereign debt rating on worries about the banking system.

Iceland's financial firms have been frozen out of credit markets over concerns they took on too much debt during a rapid overseas expansion during the last few years.

Prime Minister Haarde said the banks would now shrink foreign involvement.