Welcome News Features FAQs
08/10/08
Government guarantees 100% of Icesave deposits

Chancellor Alistair Darling has said he will ensure all UK savers with accounts in the closed Icelandic internet bank Icesave get all their money back. This includes all the savings of the 5% of Icesave's UK customers who have deposits over 50,000.

In an interview with the BBC he said he was doing this because the Icelandic authorities had reneged on their obligations to ensure compensation could be paid.

He said: 'The Icelandic government, believe it or not, have told me yesterday they have no intention of honouring their obligations here.

'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.

Later, a Treasury spokesman said: "We guarantee that no depositor will lose any money as a result of the closure of Icesave."

Icesave's parent bank, Landsbanki, was taken over by the Icelandic government on Tuesday and declared insolvent.

Iceland's Prime Minister Geir Haarde warned that his country was facing a risk of "national bankruptcy" as the global banking crisis threatened to overwhelm the island nation.

The chancellor's guarantee will come as a relief to the estimated 300,000 British savers who were left fearful on Tuesday night that they would need to fight for any compensation.

On Tuesday morning, savers accessing the Icesave website were greeted with the message 'We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly'.

As part of its plan the UK government has frozen all the British assets of Landsbanki until the position of savers in the UK becomes clear.

Prime minister, Gordon Brown, revealed that the government would pursue Iceland in the courts to reclaim the money.

Credit rating, research and risk analysis firm Moody's raised concerns about the security of the Icelandic banking system ealier in the year, due to its reliance on the money-markets, as opposed to High Street savers' cash. As it turns out, they were right.