Iceland agrees repayment of Icesave compensation

by Gill Montia

Story link: Iceland agrees repayment of Icesave compensation

Icelandic authorities have agreed to repay the £2.35 billion paid out to by the UK government to compensate savers with the failed Landsbanki, which operated online savings brand, Icesave.

In October of last year Landsbanki was placed in administration, leaving the accounts of around 300,000 UK Icesavers frozen.

The Treasury stepped in with a 100% guarantee of cash on deposit and at the same time froze Landsbanki’s assets in the UK.

According to reports, an agreement has now been struck that allows the Icelandic financial services compensation scheme to sell Landsbanki’s assets and eventually repay the compensation handed out by the Government.

In the meantime, interest will be paid on the debt to the Treasury, which may not see full settlement for up to 15 years.

However, UK local authorities will not benefit from the proposals; when the Icelandic banking crisis hit last October, 123 local authorities had over £900 million invested in the country’s banks.

So far, administrators for Heritable Bank, the UK subsidiary of the failed Landsbanki, have told local authority creditors they could get up to 80 pence in the pound on their deposits.