HELSINKI - ICELAND'S biggest bank Kaupthing, which was nationalised earlier this month, will borrow money from three banks in Finland to repay deposits to customers there, the Finnish financial supervisory agency said on Monday.

'Nordea Bank Finland, OP-Pohjola Group and Sampo Bank have agreed on a fixed period financing to enable the Kaupthing Bank's Finnish branch to pay its customers back their deposits with interest,' the agency said in a statement.

The loans would total around 100 million euros (S$199 million), it said, adding that Kaupthing had some 10,000 customers in Finland.

Kaupthing's operations in Finland were halted by the financial supervisory agency on October 9 after Reykjavik nationalised the bank.

The Icelandic government took over all three of the Atlantic nation's leading banks, which were hit hard by the global financial crisis and were teetering on the brink of bankruptcy due to lacking liquidity.

The Icelandic financial authority FME and the committee that administrates Kaupthing have agreed to the plan to pay back deposits to customers, but it still needs to be approved by the Finnish parliament, according to the statement.

In a separate statement, the Finnish agency said it had granted the Kaupthing Finnish branch permission to continue managing customer assets, but said the bank would not be allowed to take deposits.

'The branch may handle its existing customers' orders regarding investment services in so far as is necessary for the management of customer assets to safeguard the interests of customers,' it said.

The Finnish agency said it would provide more information later about when the deposits would be repaid. -- AFP