BoE to loan £100m to Landsbanki

| October 13, 2008 | 0 Comments

Talks between the UK and Iceland look like they have reached a satisfactory conclusion after the Bank of England (BoE) has agreed to provide a short-term secured loan of up to £100 million to the UK division of Icelandic bank, Landsbanki.

It is hoped that the loan, announced to parliament this afternoon by Chancellor Alistair Darling, is to help maximise the returns to UK creditors.

Icesave, the UK branch of Landsbanki, closed last week, leaving 300,000 UK savers unable to withdraw their funds. Mr Darling has already assured savers that their money is 100% guaranteed even if their savings exceed the £50,000 per individual covered by the Financial Services Compensation Scheme.

Meanwhile, the Chancellor added that Treasury officials are in Reykjavik working with the Icelandic authorities to facilitate claims by UK charities and local authorities on their deposits held at these Icelandic banks.

It has been revealed that 108 British local authorities have £842.5 million invested in Icelandic banks, according to Britain’s Local Government Association.

In related news, Iceland’s stock exchange remained closed today due to ‘unusual market conditions‘. The country suspended trading on the OMX Nordic Exchange for two days last Thursday in a bid to prevent further crises.

Last week saw the nationalisation of the country’s three largest banks.

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