Iceland's parliament has voted to bring court charges for negligence against former Prime Minister Geir Haarde, who led the country during events leading up to its banking collapse in 2008.

The parliament declined to press charges against the former foreign and finance ministers, Ingibjorg Solrun Gisladottir and Arni Mathiesen, as well as former Business Minister Bjorgvin Sigurdsson.

A court hearing would mean the first sitting of the Landsdomur, a special chamber set up in 1905 to try government ministers accused of crimes.

The next step is that parliament will appoint a special prosecutor who will bring the charges against Mr Haarde before the court.

Mr Haarde was the first political leader to lose power as a direct result of the global financial crisis when his coalition collapsed after protests.

The former prime minister, who apologised in 2009 for being partly responsible for the events leading up to the banking collapse, told Icelandic broadcaster RUV that parliament's decision was ‘difficult and hard to bear’.

Mr Haarde, 59, pointed out that two current government ministers - Prime Minister Johanna Sigurdardottir and Foreign Minister Ossur Skarphedinsson - previously held seats in his coalition cabinet.

The parliamentary vote was close, with 33 members voting to proceed with the charges and 30 voting against.

Iceland's three main banks collapsed in late 2008 under a mountain of debt built up during a decade of overseas expansion, sending the economy into a tailspin and investors running.

The country remains in deep recession and cut off from overseas capital markets while it tries to recover from the banking crisis with help from the International Monetary Fund and its Nordic neighbours.

Mr Haarde was prime minister from 2006 to 2009 when the country's high-flying banks entered the final stages of an aggressive expansion and was blamed by many Icelanders for not averting financial meltdown.

The coalition government comprising his Independence Party and the Social Democrats fell in early 2009 in the face of sometimes violent protests in the North Atlantic island country, and his party lost power in snap elections.

Efforts to assign blame for the economic collapse have been under way since then and in April this year, an official investigation accused Mr Haarde, central bank head David Oddsson and other former officials of gross negligence.

Investigators said authorities should have reacted when Iceland's main banks - Kaupthing, Glitnir and Landsbanki - grew to eventually dwarf the island's economy, setting the stage for the meltdown at the height of the global financial crisis.