£3 billion Iceland loan to be finalised

£3 billion Iceland loan to be finalised




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This week an agreement is being reached for the UK Treasury to lend Iceland £3 billion so UK depositors of failed online bank, Icesave, can be repaid. Whilst individual depositors should be safe, this loan won’t cover any corporate or government account holders. 

The loan, which represents roughly 30% of Iceland’s gross domestic product, is crucial in unfreezing the 300,000 accounts of UK customers that were blocked during the collapse of one of the main Icelandic banks, Landsbanki a few weeks ago.

 

A delegation from the UK Treasury will meet with officials in Reykjavik this week to tweak the terms of the loan, the precise size of which, has not yet been confirmed.

 

Easing tensions between the UK and Iceland is vital in ensuring that Icesave depositors receive their savings quickly and painlessly. The proposed loan would mean that the Icelandic government could pay its part of compensation payments, whilst the remainder will be covered by our Financial Services Compensation Scheme.

 

The Icelandic government is obliged to pay the first £16,189 of any compensation claim and the UK government makes up the difference up to £50,000. Due to extraordinary circumstances, the government has arranged to pay any additional claims over the £50,000 limit as well.

 

However, it has been predicted that UK taxpayers could find themselves footing at least £2.4 billion of the bill in protecting UK Icesave depositors.

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