All UK savers with accounts in Icesave, the closed Icelandic internet bank, will get all their money back, ensured Chancellor Alistair Darling in an interview to BBC.
The internet bank has about 300,000 customers in the UK. Icesave’s parent bank, Landsbanki was taken over by the Icelandic government on Tuesday and declared insolvent. Read the full update here.
“We guarantee that no depositor will lose any money as a result of the closure of Icesave,” said a Treasury spokesman.
As part of its plan, the UK government has frozen all the British assets of Landsbanki until the position of savers in the UK becomes clear.
Over 22,000 people with savings in the Heritable bank, also owned by Landsbanki, are also being rescued. The accounts, amounting to £538m, are being transferred to the control of the giant Dutch bank ING.
The collapse of Landsbanki, its Icesave subsidiary, and its UK bank Heritable, had left UK savers in limbo.
They first heard of its problem on Tuesday when they saw a statement on the Icesave website saying that it was not allowing customers to move money in or out of their accounts.
Shortly afterwards Landsbanki was taken over by the Icelandic authorities to stop it collapsing as part of the international credit crunch.
Darling said that “The Icelandic government, believe it or not, have told me yesterday they have no intention of honouring their obligations here”.
“Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn’t got any money in it.
“The British scheme would top that up to £50,000, but people over and above that would lose out,” he added.
“But I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back.”
The Icelandic Prime Minister Geir H. Haarde is to clarify this matter in his speech at a press conference postponed to 4pm Icelandic time.