Lenders To Fork Out £1bn For Iceland Losses

Written By Unknown on Senin, 02 September 2013 | 14.47

By Poppy Trowbridge, Business and Economics Correspondent

British banks, building societies and credit unions have begun making multimillion pound payments to cover the costs of the Icelandic banking crisis.

When the banking crisis struck Iceland in 2008, hundreds of thousands of British savers had deposits in Icelandic banks, many through accounts at Icesave which went bankrupt.

At the time, concern mounted over the potential losses for UK customers so the UK Government stepped in to ensure that no one lost their money.

British banks are now repaying the Government for that expense, by writing out cheques for up to £1.089bn of this compensation.

Anthony Browne, chief executive of the British Bankers Association, said: "The UK banking industry is today picking up the tab for £1bn of the costs of the Icelandic banking crisis. This money ensured that no savers who had money in Icelandic banks lost out.

"We hope it gives confidence to consumers that if there is ever another bank failure that their savings will be protected."

Mr Browne says the fact the banks are able to make these repayments now shows that the industry is returning to health.

The money will be paid in three instalments, over three years from today and are required under the Financial Services Compensation Scheme which protects customer deposits in the event of bank failure. 

The scheme now covers all customers' savings up to the value of £85,000 should another bank go into insolvency.

Joe Rundle, head of trading at ETX Capital, told Sky News: "The news is actually positive for the vast majority of savers who are guaranteed by the compensation scheme.

"It is our inherently sturdy, transparent and reassuring compensation scheme which provides comfort and confidence to savers who need protection, especially in times like this."

However, he added: "It couldn't come at more difficult time for the UK banking sector which is evolving rapidly.

"UK banks will ultimately end up having to raise more capital to fund this repayment which will be met with disappoint by shareholders."


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