Oct. 13 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling said the Bank of England will provide a short-term loan of 100 million pounds ($174 million) to Landsbanki Islands hf, to help the Icelandic bank repay depositors in the U.K.

``The Bank of England is today providing a short-term secured loan of up to 100 million pounds to Landsbanki, to help maximize the returns to U.K. creditors,'' Darling told lawmakers in Parliament in London today.

Britain's Treasury froze some of the bank's assets in the U.K. last week as Icelandic authorities seized the nation's banking industry. U.K. Prime Minister Gordon Brown on Oct. 9 threatened to freeze all Icelandic company assets unless the issue was defused.

``We need to try to resolve this problem with Iceland,'' Darling said at a press conference in London earlier today. ``They cannot get into this position where they cut off everyone who does not happen to be in Iceland. In the meantime we are taking steps to preserve the assets we have in this country.''

The U.K. government sent a delegation to Reykjavik on Oct. 10 in an attempt to end the rift over who will compensate British depositors with money in Iceland's collapsed banks.

The loan will be secured against the Landsbanki assets in the U.K. that were frozen last week, said Michael Ellam, a spokesman for Brown.

To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net

Last Updated: October 13, 2008 12:59 EDT