LONDON - Britain said it wanted Iceland to rapidly resolve the issue of compensation for the failure of Icelandic bank Icesave, after the North Atlantic island's President Omar Grimsson refused on Tuesday to sign a bill authorising this.

Britain and the Netherlands are seeking more than 3.1 billion pounds from Iceland which they paid in compensation to their domestic depositors after Icesave's failure in 2008.

A bill approving this passed the Icelandic parliament, but was vetoed by the president, putting the bill to a referendum.

The Treasury will consult with colleagues in Iceland to understand why this bill has not been passed and will work with them, the Netherlands and within the EU to resolve this matter as soon as possible, a British finance ministry spokesman said.

(Reporting by David Milliken)