NEWS

REYKJAVIK, Iceland (AP) - Iceland nationalized its second-largest bank Tuesday under emergency legislation and said it had negotiated a 4 billion-euro ($5.4 billion) loan from Russia to shore up the nation's finances amid a full-blown financial crisis.

A Russian official, however, said a loan had not been agreed upon.

The bailout of Landsbanki came a day after trading in shares of major banks was suspended, the Icelandic krona lost a quarter of its value against the euro and the government rushed through emergency legislation giving it sweeping powers to deal with the financial meltdown.

"As declared by the government, all domestic deposits are fully guaranteed," the Financial Supervisory Authority said. "Landsbanki's domestic branches, call centers, cash machines (ATMs) and Internet operations will be open for business as usual."

Within hours of the government move, the Samson holding company, which held a 41 percent stake in Landsbanki, went to the district court seeking temporary protection from its creditors.

Iceland's central bank said in a statement that it had been informed by the Russian ambassador, Victor I. Tatarintsev, that Iceland would be given a loan of 4 billion euros ($5.4 billion), and that this had been confirmed by Prime Minister Vladimir Putin.

However, the Russian state news agency RIA-Novosti quoted Deputy Finance Minister Dmitry Pankin as saying there had been no formal approach from Iceland and no decision had been made.

A loan would support the Icelandic government's efforts to gain control of an increasingly dire financial situation, which saw it coming to rescue of the third-largest bank, Glitnir, only last week.

Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country's banking sector to the global financial turmoil raised the specter of "national bankruptcy."

Iceland is paying the price for an economic boom of recent years that saw its newly affluent companies go on an acquisition spree across Europe and its banking sector grow to dwarf the rest of the economy.

Investors are now punishing the  country for the banking sector's heavy exposure to the global credit squeeze: its currency has plummeted, imports have fallen and inflation is soaring.

A collapse of the Icelandic financial system could reverberate across Europe.

One of the country's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers - including enough to make it the largest private company in Britain, where it owns a handful of well-known stores such as the famous toy store Hamley's.