The first country was ICELAND.

Iceland's three biggest banks are now under de facto government control.

Oct 9: Iceland's bank regulator took control of Kaupthing to keep the banking system functioning.

Oct 7: Iceland's Financial Supervisory Authority takes full control of Landsbanki (the country's 2nd largest bank); meanwhile, government announces that all domestic deposits are fully guaranteed.

Sept 29: Iceland's government took a 75% stake in Glitnir (the country's third-largest bank) when it injected €600mn ($862mn) to help Glitnir with liquidity issues and to enhance stability within the financial system
Analysts: Because Iceland is a small country with extensive cross-shareholdings, if one part collapses, the rest could follow like a house of cards; Icelandic banks helped fund a web of investment firms with stakes in other Icelandic companies.

The balance sheets of Iceland's three largest banks (Glitnir, Kaupthing, and Landsbanki) are about 12 times larger than Iceland's $19 billion GDP.

Iceland's government said it does not plan to hold its share in Glitnir for an extended period.

This turmoil confirms market worries about the ability of Iceland’s banks to withstand the current credit squeeze, given their weak base of deposits at home and their dependence on wholesale funding.

Icelandic kronor has also fallen almost 60% against the dollar this year because of concerns over the island’s faltering economy, large current account deficit and external borrowing; fall of the kronor has added to banks’ problems as it has increased the size of their debt burden.