The Icesave bill has been the subject of protests in Iceland
Iceland's parliament will meet on Friday to plan a referendum on the controversial Icesave bill.
Draft legislation drawn up by the government has the referendum scheduled for 20 February.
The Icesave bill is up for public vote following the Icelandic president's refusal to approve it.
There has been significant public opposition to the legislation, which commits Iceland to repaying $5bn (£3.1bn) to the UK and the Netherlands.
Opponents believe the payment terms are too onerous and will hurt Iceland's economic recovery.
Government ministers met opposition parties following the president's announcement on Tuesday to discuss how to progress.
It is hoped that new laws governing the referendum can be drafted in one day, allowing the vote to go ahead as soon as possible.
This will be the first time Iceland has held a referendum of this kind.
Previously, laws vetoed by the president have been withdrawn before a public could be held.
It is not yet clear what course of action the Icelandic government will take in this case.
Icesave's parent bank, Landsbanki, collapsed in 2008
Public opinion in Iceland is believed to be heavily against the bill, which is designed to compensate the UK and Netherlands for money lost in Icelandic banks during the financial crisis.
But the government is anxious to see the bill become law, arguing that Iceland needs to be seen to be fulfilling its international obligations.
Further bail-out money from the International Monetary Fund - which Iceland's recovery plan relies on - is also dependent on Iceland striking a repayment deal.
A vote against the bill in the referendum will see the law revert to an earlier agreement, struck in August and signed by the president.
However, that would be unacceptable to the UK, as the old agreement did not guarantee that the full amount owed would be paid back.