The Government is putting its money where its mouth is by lending the Financial Services Compensation Scheme £800million so that it can refund UK saving customers of Icesave.
The FSCS guarantees UK savings up to £50,000 – recently increased from £35,000 by the Treasury – but the Government is lending the FSCS enough to top up and deposits over this amount.
When Icesave's parent company, the Icelandic bank Landsbanki, went into receivership in October, depositors should have gotten their money back under Iceland's compensation scheme, but the Icelandic Prime Minister Geir Haarde said that the Icelandic Government would be unable to honour its compensation to Landsbanki's UK savers.
This has sparked bad feelings between the two nations, and until the UK Government goes through a court process to reclaim the money from Iceland, the Chancellor Alistair Darling was prompted to announce that the Government would guarantee that the more than 200,000 UK Icesave depositors would not lose a penny of their £4billion locked in the Icelandic banking system.
The online savings accounts
from Icesave drew large numbers of UK savers with their competitive interest rates, often topping best buy tables.
The FSCS has begun the compensation process this week, contacting customers with details of how the payments will occur. Once they receive further details, customers will be able to complete a short online process and their money will be transferred to their nominated account electronically within five working days.
It is hoped that the majority of claims will be settled by the end of November.
© Fair Investment