A team of British Treasury officials headed to the north Atlantic island on Friday to discuss how to deal with an estimated 1 billion pounds of British deposits trapped in the collapsed banks.

“This is the responsibility of the Icelandic authorities. They have got to take responsibility for this situation,” British Prime Minister Gordon Brown said in London.

In Vienna, Austria’s Erste Group Bank said it had 300 million euros (US$411.7 million) exposure to Icelandic banks.

Austrian cooperative bank Raiffeisen Zentralbank (RZB), the parent of listed Raiffeisen International, said it holds Icelandic bank debt but declined to say how much.

The Finnish financial watchdog said Finnish banks’ total Icelandic bank exposure was 210 million euros and it was too early to estimate possible losses from that.

Iceland’s financial markets ground to a halt as traders reported hardly any trades in the crown currency and money markets while its stock exchange remains shut until next week. The government seized control of three of Iceland’s biggest banks — Kaupthing, Landsbanki and Glitnir — this week and halted all trade on the stock market as the country fell victim to the financial crisis sweeping the world.

Home to just 300,000 people and previously best known for its geysers and other natural splendours, Iceland turned from a fishing based economy to become an international financial haven in the past decade.

Its citizens enjoyed the trappings of prosperity as its banks expanded dramatically overseas, investors took large positions in its high-yielding currency and foreign money poured in to local projects.

All that changed this week. The government adopted sweeping powers on Monday that gave the state the ability to dictate banking operations.

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