Iceland to repay lost savings

A black hole has been left in the finances of UK savers, as well as a number of local councils and unfortunately a few well-known charities.

Following protracted negotiations by the UK and Holland over repayments, Iceland has agreed to accept liability on deposits that were held up to £16,000.

The dispute has affected the island’s financial restructuring as it put a halt to the $2bn bailout plan Iceland had secured with the International Monetary Fund (IMF), although the agreement now paves the way for the loan.

Estimates indicate that up to 300,000 British savers held savings worth £4bn in Icesave which was part of the collapsed Landsbanki.

Previously Alistair Darling said the Bank of England would provide funds to the Financial Services Compensation Scheme to cover losses at the Icesave bank. However, in order to fall within EU regulations, Iceland would have to accept this liability and the guarantee is no longer just for domestic savers.

Under the terms of the settlement, Iceland has agreed to accept liability on deposits up to £16,400 after saying its deposit guarantee would cover only domestic savers.

Iceland had to apply for the IMF loan as the financial markets, the banking system and the currency all failed, but now that agreements to repay British and Dutch savers are in place, the IMF are now in a position to help.

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