November 5 2008
About 200,000 Britons whose savings were frozen because of the collapse of Icesave, the internet bank owned by Landsbanki, of Iceland, will be told this week how they will get their money back.
Savers will be sent a letter from the Financial Services Compensation Scheme (FSCS) explaining that most will be compensated before the end of the month.
Savers have been unable to access their accounts since October 7, when Landsbanki went into receivership in Iceland. The deposits will be paid into savers’ linked bank accounts, which they would have set up at the time that the Icesave account was opened.
The compensation will follow the formal approval by the International Monetary Fund (IMF) of a $2.1 billion (£1.32 billion) two-year loan for Iceland within the next few days, which is expected to restore confidence to the country’s battered banking system.
The Government guaranteed that all deposits held by British retail savers would be returned, even those above the £50,000 limit.
The FSCS said that savers would receive an e-mail this week explaining what is happening. Soon after, another e-mail will be sent containing more details and instructions on how to use a short electronic procedure to complete the transfer.
The process is expected to be phased to manage the flow of payments through the system and for security reasons.
The Government has guaranteed an estimated £4 billion in savings held by the banks but local authorities, charities and police authorities are waiting to learn whether the protection will be extended to cover them.
Separately, the Conservative Party is stepping up the pressure for an independent inquiry into the Government’s handling of the Icelandic financial crisis.
The move follows claims that the Treasury had been secretly monitoring developments for six months before a banking collapse that threatened British savers and local authorities with heavy losses.
Mark Hoban, Shadow Financial Secretary to the Treasury, called for a wide-ranging independent inquiry into the way the Treasury and the Financial Services Authority reacted to the turmoil in the island’s banking business in the lead-up to the decision to intervene and protect retail depositors.