Reykjavik/Stockholm  - The shake-up of the Icelandic banking sector continued Wednesday as the Icelandic Financial Supervisory Authority (IFSA) took control of a second bank.

The take over of Glitnir came after the Icelandic government, backed by opposition parties, late Monday adopted an "emergency law" to reorganize its financial system which has been severely battered.

The agency said Glitnir's domestic deposits were "fully guaranteed" and operations were to remain open for business as usual.

A week ago, the government of Iceland bought a majority stake in Glitnir bank, paying 600 million euros (815 million dollars) for a 75-per-cent stake.

On Tuesday, the agency took over the Landsbanki bank.

Meanwhile, the Swedish central bank said Wednesday it approved a 5-billion-kronor loan to the Swedish branch of Iceland's largest bank, Kaupthing.

"The conditions in the Icelandic bank sector have recently made it difficult also for Kaupthing Sverige AB to meet its payment obligations," Swedish central bank governor Stefan Ingves said in a statement.

The loan was aimed "to safeguard financial stability in Sweden and ensure the smooth functioning of the financial markets," he added.

The Swedish central bank and the Swedish Financial Supervisory Authority said Kaupthing Bank Sverige was solvent.

Kaupthing on Tuesday said it had secured a 500-million-euro loan from the Icelandic central bank.

Iceland's Prime Minister Geir Haarde on Monday said the bank crisis posed a national threat.

The commercial banks in the North Atlantic nation of 300,000 people have rapidly expanded their operations in recent years, and "their liabilities are now equivalent to many times Iceland's GNP," Haarde added. (dpa)