Reporting team: Rowena Mason in Reykjavik, Louise Armitstead, David Litterick and Mark Kleinman in London and Edmund Conway in New York Last Updated: 4:10PM BST 06 Oct 2008  The government bailed out Glitnir, the nation's third-biggest bank Photo: BLOOMBERG NEWS  Sources said the talks centred on a plan to inject up to €10bn into Iceland’s banking system from institutions including Nordic central banks and pension funds that are being asked to repatriate assets.  The talks have been triggered by concerns about the financial health of Kaupthing, Iceland’s biggest bank and a financier of investors in British businesses including Mitchells & Butlers, the pub group, and Debenhams, the department store chain.  An announcement about the Icelandic government’s plans is expected before European markets open tomorrow.  One insider said: “Iceland’s pension funds are well capitalised and secure. They have the ability to support the financial system. Everyone in Iceland is working day and night to find a solution.”  That could be critical to thousands of British savers who have deposited money with the banks.  The prime minister, Geir Haarde, and the country’s central bank have held conversations with their counterparts in Scandinavia over a potential international bailout of the Icelandic economy. The Financial Services Authority and UK Treasury are monitoring the situation closely.  Yesterday Mr Haarde told The Sunday Telegraph that it was likely that Icelandic banks would start selling foreign assets that they own. “I think many are in the process of [selling assets]. It would be the natural thing for them to do.”  This weekend, Singer & Friedlander, the UK arm of Kaupthing, was approached by several parties offering to open takeover talks.  Last week broking clients of Kaupthing were asked to put up more cash or close their leveraged positions in a move that was seen as a sign of distress. Yesterday Kaupthing insisted it had been targeted by traders overreacting to news that the bank had increased its margin requirements.  Sigurdur Einarsson, Kaupthing’s chairman, said: “Kaupthing continues to manage its business prudently. We are naturally concerned when we hear malicious rumours and sensationalism about Kaupthing being reflected irresponsibly. We ask people to look at the facts, not rumour and ­innuendo.”  Some of Britain’s best known entrepreneurs have been caught in the crisis. Robert Tchenguiz, the investor, is one of Kaupthing’s biggest clients. Sources close to him said he had received margin calls in recent days but had met them without difficulty.  Kaupthing has said it may abandon a high-profile venture in Beverley Hills it shared with the Candy brothers, the property investors, and Richard Caring, the rag-trade billionaire, leaving two of its top clients in the lurch just seven days before a crucial loan repayment. Kaupthing is liable for 60 per cent of a $350m loan due for repayment to Credit Suisse in five days but last week told its equity partners it may pull out.  The Icelandic crisis talks capped another week of turmoil in the global banking system, with several large banks being nationalised and the US government’s $700bn bailout package finally being enacted.  However, last night Ken Rogoff, the former chief economist at the IMF, claimed that America’s rescue package would not work. He said that the $700bn pledged to buy up “toxic debt” fell short of the $2,000bn needed.  Such is the slump in the UK economy that the Bank of England’s Monetary Policy Committee is expected to relax its fight against inflation this week with a cut in interest rates of at least 25 basis points.
The prime minister of Iceland is leading crisis talks with the country’s    central bank and leaders of its top pension funds to thrash out a rescue    plan for the country’s ailing banking industry, a move that will have    profound implications for some of Britain’s richest tycoons.