ICELAND WARNS OF BANKRUPTCY Iceland's banks faced a battle for survival Tuesday, after the country's government introduced emergency legislation to give the government sweeping new powers over its collapsing financial sector. Iceland's attempt to wrest control of the increasingly dire situation and restore some confidence in the country's hard-hit banking sector followed a day of panic on Monday that saw trading in shares of major banks suspended and the Icelandic krona fall a quarter against the euro. The British arm of Icelandâs Landsbanki stopped British customers withdrawing or depositing money Tuesday. A notice on the website of Internet bank Icesave offered no explanation for the move, but it came as Icelandâs Financial Supervisory Authority said it would take control of the countryâs second largest bank. Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country's banking sector to the global financial turmoil was raising the specter of "national bankruptcy", AP reported. Iceland agreed to adopt sweeping powers over banks on Monday as its financial system tottered, its currency plunged 30 percent and a leading agency cut its credit ratings. The country's financial stature had swelled in recent years as its banks expanded overseas, investors took large positions in its high-yielding currency and foreign firms poured money into local projects. RUSSIA POSITIVE FOR BAIL-OUT Russia takes a "positive view" of a request for credit from Iceland and is to hold talks on the issue, Russian Finance Minister Alexei Kudrin said on Tuesday, quoted by Russian news agencies. Iceland's central bank had earlier said the country secured a 4 billion euro emergency loan from Russia, and that the loan had been personally approved by Russian Prime Minister Vladimir Putin, however media reported a top Russian official had later denied that Moscow had granted the loan. "Four billion euros would be more or less what Iceland needs to cover the whole banking system assets with their reserves," Elisabeth Gruie, currency strategist at BNP Paribas told Reuters. "It's also a surprising move for Russia that reflects its desire to reaffirm itself as a world power." The government took control of the second largest bank, Landsbanki and the central bank gave the biggest bank Kaupthing a 500-million-euro ($678 million) loan. The third largest bank, Glitnir, was nationalized last week.