Iceland must guarantee compensation for Icesave customers to get IMF bail-out

14 November 2008 / by Rachael Stiles
A number of countries, including Britain, Germany and the Netherlands, have demanded that Iceland provide a guarantee that it will compensate those countries which have been affected by the collapse of its international businesses, such as Icesave, before being allowed a bail-out from the IMF.

The IMF originally agreed to lend Iceland $2billion, with the country having to find additional funding from other nations. Denmark, Sweden, and Norway have already agreed to help their Scandinavian neighbour, and Iceland is also in talks with Russia, Japan and America.

The countries involved in halting a bail-out for Iceland from the International Monetary Fund are believed to have demanded that any rescue package involve stipulations involving a commitment from Iceland that its international depositors will be reimbursed.

In the UK, the Treasury stepped in and guaranteed that the Financial Services Compensation Scheme would compensate more than 200,000 UK savers who have about $4billion frozen in Icesave's online savings accounts.

The UK Government had to move to guarantee the deposits after the Icelandic government said that it would not be able to honour its compensation to UK savings account customers, causing fear that their money was lost.

"Iceland concluded agreements with several countries and we think that Iceland must honour those agreements before getting assistance from the IMF" a spokesperson for Dutch Finance Minister Wouter Bos was reported as saying by the Telegraph.

The Icelandic Prime Minister has tried to accept offers of financial aid from other countries but has been told that other matters, including compensation of British assets locked in the collapsed Icelandic banking system, must be cleared up before funding is provided.

Iceland was forced to nationalise its three biggest banks in October, including Landsbanki which owns Icesave.

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