"We are freezing the assets of Icelandic companies in the United Kingdom where we can. We will take further action against the Icelandic authorities wherever that is necessary to recover money."
He added: "This is fundamentally a problem with the Icelandic-registered financial services authority - they have failed not only the people of Iceland, they have failed people in Britain."
Mr Haarde, asked if he felt there was a crisis in relations between Britain and Iceland, said: "I thought so for a few minutes this morning when I realised that a terrorist law was being applied against us.
"That was not very pleasant. I'm afraid that not many governments would have taken that very kindly, to be put in that category and I told the chancellor that we were not pleased with that."
But he said he had cleared up a number of issues with Mr Darling.
Minister for Work and Pensions, James Purnell, said efforts were going on to ease the diplomatic situation with Iceland.
Geir Haarde on the 'painful process' facing the banking industry
"Clearly it's been unacceptable that Iceland was only acting to protect its own depositors.
"That's why we've acted to protect ours, and it's also been frustrating we haven't been able to get in sort of proper communication with them.
That is now something that's been addressed - Treasury officials are going there in the next few days - and we want to make sure that we address this in a way that's constructive with the Icelandic government."
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