D. Carnegie & Co, Sweden's listed investment bank, has been seized by the country’s government and will be later sold off after allegations that it took heavy loan risks.

Sweden's national debt office took over Carnegie Investment Bank and Max Matthiessen Holding, a government statement said. These are the two units that comprise Carnegie.

Carnegie provides value-added services in securities brokering, investment banking, asset management, and private banking, as well as pension advisory services to institutions, corporations and private clients.

"Carnegie is important to the system and there could be very significant problems for households and companies if we jeopardize the stability of the financial system," Financial Markets Minister Mats Odell was quoted yesterday as saying in media reports. "Carnegie's problems are not due to a lack of capital, but due to a lack of confidence in the bank," he said.

The takeover will break up the 205 year-old firm that bankrolled industrialisation in the city of Gothenburg, where it was founded by Scottish-born David Carnegie. In recent years, Carnegie was the subject of government probes into slack supervision of its traders, as well as its lending policies.

Carnegie employs 1,100 people in Sweden, Denmark, Norway, Finland and the UK and offers investment banking, asset management, brokerage services and private banking. It acquired pension advisor Max Matthiessen last year.

A year ago, the bank received the maximum fine from the financial watchdog for lack of adequate internal control of its trading operations. The regulator also forced the company to change its chief executive officer.

The Swedish financial regulator revoked Carnegie's license to operate and said it would regain that license when taken over by the national debt office.

In August, a senior board member of Swedish-based Carnegie Investment Bank, Mai Lill Ibsen, left the firm but said she wished to stay on the board of directors of the subsidiary Carnegie Norges.

Carnegie has also recently appointed Goldman Sachs as financial advisor to evaluate strategic alternatives for the company.