Kaupthing Luxembourg to be sold to Arab Investors - Belgium and Luxembourg to guarantee deposits

BRUSSELS, Jan 6 (Reuters) - Belgium and Luxembourg will enter talks to create a fund guaranteeing depositors' savings at the Luxembourg arm of collapsed Icelandic bank Kaupthing (KAUP.IC), Belgium's finance minister told Reuters on Tuesday.

Belgium would contribute between 75 and 100 million euros to the fund, Finance Minister Didier Reynders said as he exited a meeting with key ministers where they agreed to propose the idea to Luxembourg.

He said the fund would mean a risk for the states and their taxpayers should Kaupthing Luxembourg fail, but stressed that their primary goal would be for Luxembourg to sell the bank by the beginning of April, likely to a group of Arab investors already in talks to purchase the distressed company.

"We would take a risk, on behalf of the Belgian state, of between 75 and 100 million euros," Reynders said, specifying that the fund would guarantee up to 20,000 euros per account immediately, and ultimately up to 100,000 euros per account should Kaupthing not be taken over. "But our priority remains having the bank bought," he said.

Luxembourg's Budget and Treasury Minister Luc Frieden broadly supports creating such a fund, though details must still be worked out, an official at Luxembourg's Finance Ministry told Reuters.

Reynders declined to say how much Belgium would ask Luxembourg to contribute to the fund, saying only that Belgium would not risk more than 100 million euros.
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