Money Blog: Icelandic Savings Crisis: LATEST UPDATE
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Home » Money Blog » Recession Watch » Icelandic Savings Crisis: LATEST UPDATE
Icelandic Savings Crisis: LATEST UPDATE
By Nic Cicutti
Oct 9, 04:30 PM
Up to 180,000 UK savers who have funds in accounts with the two further Icelandic banks that have gone into administration today have been told not to panic as they will get all their money back.
The Financial Services Compensation Scheme (FSCS) has declared Heritable Bank and Kaupthing Singer & Friedlander to be in “default” – a move that allows the FSCS to begin sorting out compensation payments for all affected consumers.
The FSCS says it will write to savers with accounts at Heritable and Kaupthing, after the Treasury used its powers to transfer the majority of Heritable’s retail deposit book and Kaupthing’s deposit book for its ‘Edge’ account to Dutch bank ING Direct.
In the case of Kaupthing Singer & Friedlander, not all retail depositors had internet accounts and these non-internet retail accounts have not been transferred to ING Direct.
The FSCS says it will repay up to £50,000 per person, with the Treasury will covering balances of more than £50,000. In other words, account holders with more than £50,000 are fully protected.
Depositors with the two Icelandic banks – as well as depositors in Lansbanki’s Icesave account – are being told to visit the FSCS website , where they will be given regular updates of what is happening and details of what they should do next.
Meanwhile, the Icelandic government appears to be backtracking over its original plan to refuse to meet any of the potential compensation bill to Icesave savers, including the £16,300 minimum it is signed up to pay out.
The Icelandic Prime Minister is reported to have told journalists it may turn out that an investigation of Landsbanki assets, the bank which offered Icesave accounts, could lead to the bulk of deposits being repaid.
If so, this money will simply go to the FSCS, which will be itself be paying out any compensation claims from UK savers. It is not yet clear, however, whether repayments will include interest earned to date on the invested deposits.
Logically, this ought to be the case as Icesave, Heritable and Kaupthing accounts calculated interest daily, even if it was added monthly or annually. But this is, as yet, a detail that still needs to be worked out.
Loretta Minghella, the chief executive of the FSCS, says: “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.”
With regards to tax-free ISAS, the Treasury says: “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.”
It seems, then, that consumers are safe – but it’s not such good news for many councils and other bodies that deposited their own funds with Icelandic banks, to the tune of hundreds of millions of pounds. The councils claim they were required by the Treasury to find the highest-paying deposits – subject to advice to spread their assets as widely as possible.
The councils say they did this, only to be caught by the Lansbanki collapse. Some, such as Kent County Council, have lost many millions of pounds and want the same guarantees that apply to ordinary savers to cover them too.
But the Treasury says this is unlikely – and it’s hard to imagine why compensation should be paid to councils whose experienced finance departments should have been keeping track of all these millions, in a way the rest of us were unlikely to.
User Comments
retired folk 3 November 2008, 12:00
Can someone tell me when we will get our money back from the icesaver accounts the fscs last issued a press statement on the 2th October saying all account holders would receive letters giving instructions ect I am still waiting for my letter so is my husband. we have both taken ealy retirement my husband having a small company pension and myself with athe minimal amount from the state and the interest from our savings are what we have to live on It getting more difficult by the day perhaps the fscs could get things moving a bit it would give everyone a bit more confindence that we will actually see our money again and i am sure there are a lot of people out there in the same boat, with jobs ging to the wall daily and mortgages to be paid any money people have in savings and interest should be freely available. It must be a great worry to many people. Just tell us when and show us that something is being done not just words and no action
GJ 11 October 2008, 15:06
Teddy: Be careful how you word things. Iceland as a nation or a country does not have your money. A single company has them and you trusted them with your cash.
I hope you get your money back as I know how hard it can be not being able to let ends meet but please dont blame a whole nation for something that a single company did or has done.
On another note your problems are much worse than they could have been because of your dear Gordon Brown and Mr Darling. They have only made matters so much much worse.
Tony 11 October 2008, 15:03
clampit, when you “invest” in a Company you are gambling on that investment making a profitable return. If it doesn’t then you have lost your bet (or part of it).
When a bank asks to look after my money for me and is offering a small premium to do so then that is an agreement that is morally, and in my view should be ,legally binding .
Stew 11 October 2008, 13:08
I cannot understand that all of the councils who had millions of pounds of our council tax invested in Iceland and now consequently cannot get it back
The councils involved are informing us that it is business as usual and that there will be no cuts in services or increases in council tax
Surely this means that we have been paying far too much in local tax if they can afford to invest- our money- and yet they cannot even repair the roads cannot fund schools or the emergency services
Sander 10 October 2008, 22:59
Teddy, you get your money back from your government, so your money is safe. The UK has the financial power to help their people, Iceland doesn’t. I know many people who lost, really lost a lot of money and they will never get that back. If that is not enough their mortages are sometimes in Euro and now they have to pay twice as much as they had to do for 6 month’s ago. The house market has collapsed, so selling your house is not an option. There are simply no buyers. Food prices are increasing day by day, companies are going bankrupt.
But beside of that did you know that the £ 4.000.000.000,- is 35% of the GDP from Iceland and that Holland has a claim of 20%? And that this is only for one of the three banks? How do you think a small country as Iceland is can cover this? Do they have to pay UK and not Holland and leave their own people bankrupt behind?
How would you solve this problem?
UK gave a garantee for the savings of the people, the same for Holland, but the UK confiscated Kaupthing what made them bankrupt. This was a criminal act from the UK. Kaupthing had nothing to do with this matter and the UK made the situation worse in Iceland.
And FYI Iceland want to pay back, they just need time and of course money, but it does not help the case for the UK to use force and legal acts on a country in crisis. They should have offered the helping hand as with all crisisses.
teddy 10 October 2008, 12:37
Sander, I cannot agree with you at all, I have saved as much miney as I have with icesave, if tomorrow I become jobless and my money tied up and my mortgage to pay along with credit cards and children… you have no idea what Iceland has done to our 300,000,normal savers excluding the councils of the UK !! wake up and listen carefully my money is my money and I want it back NOW!!!! I have my own bleeding crisis at home jusy show me the money you silly people
Sander 10 October 2008, 08:41
What do you think about the Icelandic people how they feel. They do not have a government to pay their losses back. Many people are about to go bankrupt even so many companies. The food prices are increasing day by day. People wake-up with the news and go to bed with the news. Real financial casualties are to be expected in Iceland. Heartattacks and suicide will increase in Iceland the next coming weeks.
And what is UK’s prime minister doing, he is even putting more presure on them and start almost a cold war with Iceland. Normally you reach countries in direct need of help your hand and try to help them as good as you can.
clampit 10 October 2008, 07:04
does that mean that northern rock and bradford and bingley shareholders will get some money back then. as it wasnt there fault the fsa and the bank managers all f…..d up. brown has messed this country up from the start and he should be the 1 facing charges from the taxpayers.
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