Former boss of collapsed Icelandic bank in custody

REYKJAVIK: Icelandic authorities arrested the former chief executive of collapsed bank Kaupthing yesterday - the first high-profile banker to be detained after the tiny Nordic country's financial crisis.

The special prosecutor tasked with investigating the Icelandic banking crash of October 2008 said Hreidar Mar Sigurdsson was suspected of falsifying documents and breaking laws on stock trading for personal gain.

Sigurdsson is being held pending a bail inquiry.

Prosecutor Olafur Thor Hauksson said he planned to ask that the former banker be kept in custody for two weeks to prevent the possibility of him tampering with evidence or interfering with the investigation.

Sigurdsson can appeal to the Supreme Court if the prosecutor's request is granted in the district court.

Hauksson was appointed by Iceland's post-crisis government to investigate whether there was any criminal activity in the lead-up to the banking crash that crippled Iceland's economy, sending its currency into a tailspin, frightening off foreign investors and forcing out the country's former leaders.

Britain's Serious Fraud Office is still carrying out its own investigation into Kaupthing, with a focus on efforts by the bank to attract British investors to its "high yield" deposit account, Kaupthing Edge. About 30,000 British individuals, companies and organisations made an investment.

The demise of Kaupthing, one of several Icelandic banks to collapse, sparked a row between Reyjkavik and London because it failed after the British Government invoked anti-terrorist legislation to freeze the UK assets of another collapsed Icelandic bank, Landsbanki.

Britain's Treasury said the move was to ensure the money that British savers had placed in the bank would not be whisked back to Iceland.

But Iceland's prime minister at the time, Geir Haarde, blasted the move as an unfriendly act and blamed the decision for inspiring panic that led to the subsequent collapse of Kaupthing.

A cross-party committee of British MPs was later critical of London's handling of the situation.

- AP