Landsbanki in receivership but Iceland and UK guarantee Icesave Internet accounts

The Icelandic government has taken the country’s second largest bank, Landsbanki into national ownership today to prevent its collapse. Landsbanki has since issued a statement saying it has gone into receivership, not liquidation. It confirmed that the Icelandic Financial Services Authority had appointed a receivership committee and that work has already begun on restructuring Landsbanki. The UK Financial Services Authority FSA has expected Landsbanki to be declared insolvent.

The FSA says that UK savers with Internet accounts held by Icesave – a subsidiary of Landsbanki, will not need to make two separate claims for compensation, one from Iceland and one from the UK. They will have their compensation claims handled on one form by the UK Financial Services Compensation Scheme (FSCS).

Under the depositor protection arrangements in Iceland and the UK, the first £16,300 of compensation will be covered by the Icelandic authorities with the rest coming from the UK’s FSCS up to the new guarantee limit of £50,000 per person – not per account. At the moment customers may neither deposit nor remove money from their accounts.

Icesave had offered particularly attractive interest rates to Internet savers so, with 350,000 savers between the UK and Netherlands (adding up to deposits of about £4.5 billion), it is likely that there will be many account holders in Argyll affected by this development.