Landsbanki offered £100m loan from BoE to repay UK Icesave savers

13 October 2008 / by Rachael Stiles
The Bank of England has offered nationalised Icelandic bank Landsbanki £100million to repay British savers who have deposits in Icesave and other subsidiaries in the UK.

Icesave – the online savings account provider – is the UK arm of Landsbanki, which was Iceland's biggest bank until it buckled in the wake of recent financial turmoil and had to be nationalised.

About 300,000 British savers were left wondering what would become of their money last week when Icesave closed and they found that they could no longer access their savings accounts to make withdrawals or deposits.

To calm the panic which arose, the UK Government told savers that their money is 100 per cent guaranteed, and this afternoon the Chancellor Alistair Darling announced that the Bank of England has offered the collapsed bank a £100million loan in order to compensate its UK depositors.

UK savers who have money locked up in Icesave or any of Landsbanki's other UK depositors will benefit from the loan, which will "help ensure an orderly wind-down of Landsbanki which will maximise the return to UK creditors," according to a Bank of England spokesman.

The £100million loan would not be adequate to cover all of the deposits held by UK savers, and Gordon Brown has threatened to bridge the gap using Landsbanki's assets, £4million of which the Government froze last week in response to how British savers are being treated by the Icelandic Government – it has said that it will be compensating domestic customers first and would be unable to honour the compensation owed to its UK savers.

Because Icesave is the savings arm of an Icelandic company, and not registered in the UK, the Icelandic Government is liable for some of the compensation – the first €20,000 – and the issue is causing a diplomatic rift between the two country's governments.

The Chancellor said in the Commons today that he is working with the Icelandic authorities to get depositors' money back to them as soon as possible, and is also in talks about getting compensation for the charities, local authorities and other organisations which have millions of pounds in Icelandic banks.

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