British savers with Icesave are guaranteed a refund. Those with Kaupthing Edge have been transferred to Dutch Bank ING Direct.
UK Government will back Icesave
Yesterday the UK government unconditionally guaranteed British savers funds in the failed bank Icesave.
Following uncertainty about the Icelandic banking system’s ability to pay compensation to savers, the Chancellor Alistair Darling said: ‘Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn’t got any money in it. The British scheme would top that up to £50,000, but people over and above that would lose out…..I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back’.
For more on the UK compensation scheme see the Which? article on protecting your savings.
Icesave savers won’t lose out says compensation scheme
The Chief Executive of the Financial Services Compensation Scheme, Loretta Minghella, said: ‘We know that many savers with Icesave are anxious about their savings. Following the Chancellor’s announcement people can be confident they will be repaid in full.
We are working closely with all concerned on the practical arrangements to get people their money back as quickly as possible. We hope to be in a position to say more about the arrangements by the close of business on Friday, and we will publish updates on our website.’.
Icelandic compensation may still pay
However, a statement by the Prime Minister of Iceland published early yesterday evening stated that the Icelandic compensation scheme may still pay out. The statement said: ‘The Icelandic government appreciates that the British authorities are willing to step in and respond to the immediate concerns of depositors of Landsbankinn Icesave accounts. The governments of the two countries will immediately review the matter in detail through official channels with a view to finding a mutually satisfactory solution.
It should also be highlighted that on Monday evening changes were made to the Act on the Depositors’ and Investors’ Guarantee Fund strengthening the position of depositors by giving them priority when allocating assets.
There is a good probability that the total assets of Landsbankinn will be sufficient to cover the deposits in IceSave. The Icelandic government reiterates that if needed it will support The Depositors’ and Investors’ Guarantee Fund in raising necessary funds. The government of Iceland is determined not to let the current financial crisis overshadow the long standing friendship between Iceland and the United Kingdom.’
If the Icelandic compensation scheme does pay out, the UK scheme has already stated that it will handle the administration for both claims for UK consumers.
Icesave and Isas
The position on Isas has now also been confirmed. A Treasury press release yesterday said: ‘Arrangements are being put in place to ensure that all ISA customers of Icesave will continue to benefit from the tax-free status of their accounts.’
In a further dramatic development yesterday, The Financial Services Authority (FSA) announced that another struggling Icelandic Bank, Kaupthing Edge, had its savings business transferred to the Dutch Bank ING Direct.
Regarding whether savers with Kaupthing Edge can still access their accounts, the release said: ‘These steps have been taken to keep customers’ money safe – customer accounts remain open and can be accessed in the usual way’.
The FSA release also said that Mortgage and loan customers’ terms and conditions remain the same and customers should continue to make repayments as usual.