Why Icesave depositors should still be worried

Why Icesave depositors should still be worried


Following news that the Icelandic government has refused to protect UK savers of frozen bank Icesave, Gordon Brown has announced he will sue Iceland to recover the money.

Since Icelandic internet bank Icesave stopped savers from withdrawing money from their accounts on Tuesday, the 300,000 UK savers who have a combined £5 billion deposited in the foreign bank have been terrified of losing their savings. If the parent bank of Icesave, Landsbanki, were to go insolvent then it could take months to claim the cash back through compensation schemes. Since the bank went into receivership early Tuesday morning, the outlook appears to be grim.


But it’s becoming increasingly clear that Icesave will not be able to guarantee all these savings back. If Icesave goes into insolvency and can’t meet the compensation bill, the Icelandic Government would normally be expected to cover any shortfall. However, Iceland is currently fighting to stave off “national bankruptcy” with the falling value of the krona, failing banks and only £88 million reserved to cover deposits totalling £13 billion. Its government appears unwilling to guarantee billions of pounds of deposits now that they’re desperately struggling just to keep their economy afloat.


For many savers, the cash in their Icesave accounts is needed urgently for taxes. If they can’t reclaim the money soon, paying tax returns will become a problem. It was also revealed that many councils have tens of millions of pounds stashed in the accounts. Kent County Council admitted yesterday that it had £50 million stored with Icesave.


Attempting some damage control, Alistair Darling announced this morning that due to exceptional times our own Government will cover UK deposits, despite them being with a foreign bank. However, is this just another Germany-esque “political commitment” to prevent undermining trust in the banking system? Is this a solid deal or a vague political promise of “doing whatever it takes”?


For the 300,000 UK savers left out in the cold, answers are needed now over whether they’ll see their life savings disappear. Compensation schemes could take months to process, leaving hundreds of thousands without access to their hard earned money, if Darling even remains true to his word that is.


And as for Gordon Brown trying to sue a country about to go bankrupt – do the words flogging, dead and horse spring to mind?


Leave a comment