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West Ham manager Gianfranco Zola must sell players before he buys new ones after the Icelandic bank chaired by owner Bjorgolfur Gudmundsson went into receivership.

The Icelandic government vow to take control of Landsbanki, the country's second-largest bank by value, as a global economic crisis saw the country's financial system threaten to collapse.

Bank chairman Gudmundsson is Iceland's second-richest man behind his son, Thor, and the family are major shareholders in Landsbanki.

Bjorgolfur Gudmundsson led an £85 million buy-out of the East London club in November 2006. He invested another £30.5m in December 2007 after buying a further five per cent stake.

"He is not going to take money out of the club if that is your fear," vice-chairman Asgeir Fridgeirsson said. "[But] this event has limited his options for further investment this year.

"We have a very big squad and [Gianfranco Zola] feels it is not necessary to be of that size, nearly 35. The money for further transfers would need to be generated from further sales.

"There is not an intention of him to invest further in the club at the moment but the club is standing strong, generating revenues.

"There is a great opportunity for the club to develop further - by selling players, by buying new and developing new players."

West Ham lost their shirt sponsor last month after the collapse of tour operator XL Leisure.

The latest setback comes as the club are appealing against a ruling by the Court of Arbitration for Sport that they should pay compensation to Sheffield United, which could run into tens of millions of pounds, as a result of the Carlos Tevez affair.

Championship club United argue that Tevez, now with Manchester United, was ineligible to play for West Ham at the end of the 2006/07 season when his goals helped them put together a storming finish to the season to escape relegation and send the Sheffield side down.

West Ham, now in sixth place in the Premier League, made a £22m pre-tax loss in the 2006/07 financial year.

Reuters