No result in Icelandic bank talks

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Talks aimed at recovering £4bn in deposits held by UK customers in the failed Icelandic bank Icesave have broken up without result.

Treasury officials and their Icelandic counterparts are seeking to salvage the funds placed in Icesave, at risk after its parent firm Landsbanki folded.

The bank's collapse fuelled a diplomatic row after the UK government froze assets of other Icelandic banks.

An Icelandic official said the talks would resume but did not say when.

'Not over'

"This round of discussions has ended but talks are not over and will be continued in the very near future," a government spokesman said.

The fate of 300,000 UK Icesave customers, caught up in the collapse of Iceland's banking sector, sparked a heated row between the UK and Icelandic authorities earlier this month.

The UK has guaranteed the deposits of all UK private depositors in Icelandic banks.

But part of the compensation for Icesave's UK customers should come from Iceland because the bank is not registered in the UK.

Gordon Brown accused his Icelandic counterpart of "unacceptable" and "illegal" behaviour after Iceland said it could not give a guarantee to reimburse UK customers of the online bank.

In response, Icelandic PM Geir Haarde accused the UK government of "bullying" and bringing down one of its other banks after the Treasury froze the assets of Icelandic institutions in the UK.

The two countries have since pledged to work together to resolve the impasse and the UK has lent Iceland £100m to help it meet some of the cost of Icesave deposits.

At a meeting earlier this month in Reykjavik, officials from both sides said progress had been made.