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Last Updated: Friday October 10 2008 14:51 GMT

Iceland bank problems cause panic

Icelandic cash

The British government is trying to get almost a billion pounds of British money back from banks in Iceland.

It might seem strange, but lots of British people sometimes send money to banks in other countries to look after.

But now there are worries some banks in Iceland have lost cash, after taking risks with lending and borrowing.

It's bad news for lots of charities and local councils, as a number of them have got millions of pounds stuck in Iceland and can't get any of it back.

Toni, Dean, Charmaine
That's because the banks are in so much debt they've decided to freeze everyone's accounts, which means no-one can get any of their money back at the moment.

The British government has promised individual savers WILL get their money back, but businesses and charities who put their money in Iceland's banks could still lose millions.

Now Prime Minister Gordon Brown has sent some of his money experts to Iceland to try to get the banks to give their cash back too.

Why give money to banks in Iceland?

Loads of charities, local councils and even police forces have got bank accounts in Iceland, because they used to offer really good deals.
Graphic showing a $700 billion sign

Banks use the money they are given by people and businesses to invest in other businesses to try to make more money.

As a reward for picking a particular bank, that bank agrees to put extra money in their investors' accounts, as something called interest.

The Icelandic banks used to offer more interest than other banks, so that tempted lots of people from around the world to invest their money with them.