Landsbanki defaults but Chancellor says UK will guarantee Icesave Internet accounts

BREAKING NEWS: The Iceland Government has declared Landsbanki – taken into public ownership yesterday – insolvent. It has also declared inoperable the guarantee on Landsbanki subsidiary Icesave’s Internet accounts. However, the UK Government has quickly announced that it will step into the breach and guarantee the 300,000 Icesave accounts held in the UK.

From the Chancellor’s comments below, it would seem as if this is an assurance of an unlimited guarantee which will ignore the current £50,000 limit. If clarification changes this apparent situation, we will report on it at once. (10.00) The Chancellor’s action does indeed guarantee 100% of UK deposists in Icesave Internet accounts.

The Chancellor is quoted by the BBC as saying: ‘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.

But I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back.