Oct 8 2008, 03:09 AM
The Treasury today guaranteed that no British customers of Icesave would lose their savings after the Icelandic online bank collapsed yesterday.
The Prime Minister issued a blanket guarantee that the 300,000 UK customers would get all their money back – and he threatened legal action against the Icelandic authorities to force it to honour its duty to compensate savers.
Treasury officials went further, making clear that it will ensure that Icesave customers recover all their cash, up to and above the £50,000 limit. It hopes to be able to clarify later how, and when, Icesave customers will get their money back.
Officials indicated that it is likely that savers will be able to make a single application to Britain's Financial Services Compensation Scheme for the return of all their money.
Icesave, the online British arm of Landsbanki, Iceland’s second biggest bank, announced yesterday that its customers could no longer withdraw or deposit money. Landsbanki was taken into receivership by the Icelandic authorities and its board of directors was fired.
Yesterday the Icelandic prime minister indicated that Landsbanki was still operational and would be able to repay the money deposited by British savers, but the financial turmoil in the tiny Nordic country appeared to have worsened overnight.
"The Icelandic government have told me, believe it or not, they have no intention of honouring their obligations there," Alistair Darling, the Chancellor, told BBC radio this morning.
Citing "exceptional circumstances" he said: "We have decided we will stand behind those savers."
Mr Brown later told a No 10 news conference that Britain stood ready to sue Iceland to honour its responsibilities. "We are taking legal action against the Icelandic authorities, to recover the money lost to people who deposited in UK branches of its banks," he said.
More than 300,000 British customers had around £4 billion deposited in Icesave accounts, with the average saver having about £15,000 with the bank. Some had much more than this, though. One saver, Peter Amodio, has told The Times that he had £180,000 on deposit with Icesave. Another saver had her £200,000 life savings there.
Icesave was one of a handful of banks to claim the so-called passport exemption - meaning that savers are supposed to apply to the Icelandic authorities for the first €20,887 (£16,170 pounds) they have lost, with the British compensation scheme topping up the rest.
Today’s developments seem to suggest that this will no longer be necessary for British savers as the Government would do it on their behalf.
Mr Darling made plain today that he would pursue the Icelandic authorities, if necessary through the courts, to recoup the money. "We are pursuing Iceland and we will pursue it vigorously to make sure that we get the money due to us back," the Chancellor told GMTV television.
"But in the meantime I am going to be able to help those savers who would otherwise have to look to Iceland to get their money back. I am prepared to stand behind them and to stand behind the depositors.
"It demonstrates my commitment to help people who have put money into banks in these exceptional circumstances."
The online bank’s website remained frozen today.
"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," read a message on the site. "We hope to provide you with more information shortly."
Icesave customers have vented their fury online as the tried to rescue their savings.
Steve, 48, a textile management agent from Derby, central England, said: "My wife and I need to pay up to £12,000 for renovations on our bungalow next week and I have no idea if we’ll be able to access our money to do so.
"I’ve been panicking this morning and I can’t concentrate on my work. I’m worried we’ll lose all the money if the Icelandic government doesn’t have enough in its coffers to guarantee everyone’s savings."
Oct 8 2008, 04:05 PM
Very sad news about the global situation. That story is not very different from what we are experiencing here in the states. I am moving my money to local small banks with more stable conditions.
Nov 30 2008, 08:07 PM
Im glad to hear this, a few of my partners were british investors who had dealings with this company.