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New Landsbanki is a solvent bank servicing Icelandic customers.
But even a solvent bank can be broken by a bank run.
This process of hasty liquidation can cause even a previously solvent bank to fail.
When private funding dries up, they will lend without limit to any solvent bank willing to pay a penalty rate.
'I want the message to go out from this meeting today that no sound solvent bank should be allowed to fail for lack of liquidity,' Brown added.
The deal announced on Wednesday is an effort to break that logjam, but it does not involve a solvent bank selling its assets and might not offer enough taxpayer-financed sweeteners to bridge the gap between the prices banks want and the prices investors will pay.
Similar(48)
The private sector should be used to realise the remaining solvent banks.
Action was needed, and would be taken, to protect all solvent banks in the EU.
Regulators might look to separate "good" assets from "bad" assets in the solvent banks to further bolster interbank confidence.
Australia, one of the few countries with solvent banks, came last.
Under European Central Bank rules, so-called emergency liquidity assistance is available only to solvent banks.
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