Icesave compensation for 200,000 savers is on the way, says FSCS

27 October 2008 / by Rachael Stiles
The deposits of more than 200,000 UK savers who have money frozen in Icesave as a result of the collapsed Icelandic banking system will receive their compensation soon through an accelerated process, the FSCS has said.

The Financial Services Compensation Scheme announced that it will expedite compensation for UK customers of Icesave, the UK savings arm of the now nationalised Icelandic bank Landsbanki, up to the £50,000 limit.

Gordon Brown was forced to announce that the Government will top-up any compensation for savers who fall above the £50,000 limit, to stem customer's fears that their money was lost when the Icelandic Government said it would be unable to honour the compensation agreements for its UK savers.

The FSCS expects to launch the process of compensation for Icesave customers within the next 10 days, and that its top priorities are to give the savings accounts customers "some certainty and to move to a speedy payout as quickly as possible."

To decide on the best approach to compensating depositors, the FSCS has been working with the Financial Services Authority and the Treasury, and has decided that, subject to final arrangements, compensation will be made through an accelerated electronic process, which will result in faster payments and less inconvenience for the customer.

Retail depositors of Icesave and the banks where they hold linked accounts will receive a letter from the FSCS detailing the compensation plans, including instructions for a short electronic process to complete the transfer of compensation.

Loretta Minghella, chief executive of the FSCS, said: "We recognise that Icesave’s customers have been anxious about their savings. We would like to thank them for their patience.

"We have been working hard to establish a way of compensating retail depositors of Icesave without the need for a paper-based application process." she said. "We expect to offer compensation to the vast majority of retail depositors in November."

Icesave customers can do nothing other than wait for communication from the FSCS, when they will be informed how to access their savings, ISAs, or term accounts.

The FSCS has also had to compensate some 2.7 million UK depositors who have been affected by the nationalisation of Bradford & Bingley, and the collapse of Icesave's fellow Icelandic savings account providers Heritable Bank and Kaupthing Singer & Friedlander.

Kaupthing Edge and some Heritable savings accounts were transferred to ING Direct savings accounts when the Dutch ING group took them over, but some others have to get compensation from the FSCS.

Gordon Brown said this morning that the Government is "doing everything we can" to get compensation from the Icelandic Government for Icesave deposits so that the UK taxpayer is not left with the bill, and the local authorities, charities and other organisations – not protected by the Government's guarantee – can also get their money back. He is confident that talks with Iceland "will yield results."

© Fair Investment Company Ltd