Iceland agrees to refund Icesave depositors to secure $2billion IMF loan

17 November 2008 / by Rachael Stiles
Iceland will be able to get its much-needed $2billion loan from the International Monetary Fund now that it has agreed to refund customers of Icesave, its online savings provider.

About 230,000 British savers have been affected by the collapse of Landsbanki, owner of Icesave and Iceland's biggest bank, suddenly finding they were unable to access their online savings accounts.

The UK Government agreed to protect 100 per cent of British savers when the Icelandic Government said it would only refund domestic savers, sparking a row and causing Gordon Brown to seize Icelandic assets in the UK under anti-terrorist laws.

The Financial Services Compensation Scheme is currently in the process of refunding Icesave customers via an electronic transfer process. They will receive an email with instructions on how to complete the online process by logging into their savings accounts.

Iceland has now agreed to refund the collapsed bank's investors to fall in line with EU regulations, which will allow them access to a previously agreed $2billion loan from the IMF. To make up the total $6billion that it needs to restore stability in its economy, Iceland is expecting to secure further funding from other Scandinavian countries and is thought to be in talks with Japan and America.

It is not yet clear how the deposits will be made, but the total amount to be refunded by Iceland is estimated at almost £3billion, which will cover the first £16,400 (€20,000) of each depositor's money, as stipulated under EU regulations.

The local authorities, charities and other organisations which have money frozen in Icelandic bank accounts are still waiting to hear whether they will receive any compensation.

The FSCS has so far paid out £0.25billlion to Icesave customers, it said in a statement released today, since they started the accelerated online claims process.

The majority of savers are opting to have the money transferred directly to a nominated account, rather than waiting for fixed rate terms to end, the statement said.

"We are delighted to report that the initial phase, which involved offering compensation to over 10,000 Icesave customers, has gone well." said FSCS chief executive Loretta Minghella.

"The majority of those offered have already completed their part of the online process, and the first customers to be paid out received their compensation by BACS transfer yesterday. This honours our commitment to commence payments in the second week of November, and we remain on track to offer compensation to the vast majority of Icesave customers in November."

© Fair Investment Company Ltd