£1.36bn loan recovered after bank's collapse

A loan of £1.36 billion has been recovered in regards to a public bailout made in connection with the failure of Landsbanki.

The Financial Services Compensation Scheme (FSCS) has recovered £1.36 billion from the estate of Landsbanki (LBI) for the Icesave collapse in 2008.

Landsbanki’s UK branch, Icesave was a high interest, online saving scheme. In October 2008, LBI went bust and Icesave depositors were not protected completely by Dutch or British deposit insurance.

At the time of its failure, the Government protected British retail savers with a compensation payout of £4.5 billion, making it the largest creditor to LBI. This was completed by loaning the money to FSCS which then repaid consumers.

The recovery made by FSCS will assist with repaying the Treasury loans, the repayment has worked to neutralize the burden felt by UK banks, building societies and credit unions as a result of the bank’s failure. The recovery represents 85 per cent of the Government’s total claim against LBI.

Andrea Leadsom, Economic Secretary, stressed that the failure of the Icelandic banks had cost taxpayers billions of pounds, with no certainty of ever getting the money back and was delighted at the significant repayment.

“I have been pressing Ministers in Iceland to speed up the return of UK taxpayers’ money,” the Economic Secretary said.
“We remain committed to recovering the full outstanding amount of the British taxpayer’s claim from the Landsbanki estate, and will continue to work hard to make this happen as soon as possible.”
FSCS Chief Executive Mark Neale said the scheme had been working closely with the government to pursue the recoveries.

“Today, UK taxpayers and deposit takers are getting back well over a billion pounds from the estate of Landsbanki,” Mark added. “It is another significant milestone for us following the bank failures. And it's good news for firms and taxpayers.

“The recovery shows the significant financial benefit of our recoveries work; it demonstrates our commitment to recovering money from the estates of firms that go bust.”

The Government is on course to recover its entire claim on LBI’s estate by 2017.

Since the financial crisis, the Government has introduced extreme updates to the banking system by acknowledging suggestions of the Independent Commission on banking to isolate retail banking, as well as adopting the reforms put forward as part of the Financial Services Bill to make sure taxpayers will never be faced with bailing out ‘too big to fail banks’ again.