Iceland has warned it is close to national bankruptcy after an attempt to nationalise the country’s third-biggest bank, Glitnir, failed yesterday and the bank had to be placed in receivership, in the absence of any significant support from the rest of Europe.

A government receivership committee appointed by the Icelandic Supervisory Authority replaced Glitnir's board and immediately started to restructure the bank for onselling to its Finnish and Swedish businesses, Associated Press reports.

Glitnir is the second Icelandic bank, after Landsbanki, to be placed in receivership. The threat from the country’s heavily exposed banks is putting the country at risk, prompting Prime Minister Geir Haarde to warn of ‘national bankruptcy’.

Iceland has been forced to turn to Russia for a €4bn loan after the only support from EU was a $US702m loan from the Swedish central bank to provide liquidity assistance to the Swedish arm of another troubled Icelandic bank Kaupthing and intervention from the UK government to offer ₤4.9bn in guarantee of the deposits of 300,000 Landsbanki customers in the UK.