Reykjavik - The government of Iceland Monday bought a majority stake in Glitnir bank, the government and bank said. 

The government paid 600 million euros (877 million dollars) for a 75-per-cent stake in Glitnir, saying the move was aimed at strengthening Glitnir's capital ratio and liquidity. 

Glitnir's chief executive Larus Welding was to stay on in his post. 

"Having the government as an owner strengthens the capital base of the bank and removes all doubt about Glitnir's financial strength," Welding said in a statement. 

"We have seen similar things happen in the countries around us, which reflects the tough position that currently prevails in international financial markets," he added. 

"Customers will not be affected by these changes," he said. 

The main shareholders in Glitnir have accepted the offer, pending formal approval from a meeting of shareholders due to be called. 

Trading in Glitnir shares was earlier Monday halted on the Reykjavik stock exchange. 

The government said its stake in Glitnir was not to be "for an extended period." 

The Icelandic currency, which came under attack from speculators earlier this year, dropped in value compared to the euro and the dollar. (dpa)