Icesave savers may have to claim compensation

British savers of internet bank Icesave, an arm of Landsbanki, have been warned that they may struggle to claim their money.

Earlier today, the Icelandic Financial Supervisory Authority announced that the country’s Government had seized control of Landsbanki, which owns Icesave.

At the moment, Icesave is not allowing customers to withdraw money out of their accounts or to put in deposits and claims from Icesave’s UK customers, of which there are approximately 300,000, will be dealt with by the Financial Services Compensation Scheme (FSCS).

Earlier today, the Financial Services Authority brought in Ernst & Young as emergency administrators of Landsbanki’s UK operations in an attempt to protect retail depositors and British financial stability.

However, an E&Y spokesperson said the move will not protect the deposits of the 300,000 customers.

Icesave has 350,000 savers in the UK and Netherlands, with deposits of around £4.5 billion. Landsbanki launched its Icesave account back in October 2006 and has proved to be popular among UK savers due to its high interest savings accounts.

Landsbanki, which is Iceland’s second largest bank, is one of a few European banks operating in Britain, which has the ‘passport exemption’, which means that if the bank collapses, the first €20,000 (£15,500) needs to be reclaimed from the Icelandic compensation scheme, not the UK system.

Any further savings up to the maximum £50,000 now guaranteed by the British Government would come from the UK scheme.

Last week, it was announced that Iceland’s third largest bank, Glitnir, was nationalised after it faced short-term funding problems. It was the first bank in the country to be nationalised since the start of the credit crunch.

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