Icelandic bank Landsbanki has gone into receivership, leaving thousands of UK savers through its direct brand Icesave in limbo to see how much of their money they can retrieve. Icesave has 300,000 UK savers with around £4bn in deposits.
The move follows the decision by the Icelandic Government to take control of Landsbanki. The news comes on the same day (October 7) that guaranteed deposits in UK-based institutions rose from £35,000 to £50,000.
Already the bank has posted a statement on its icesave.co.uk website confirming it will not process any deposits or withdrawal requests. Because the bank is registered in Iceland, in a European Economic Area that has passported itself into the UK financial services system, it is not wholly regulated by the Financial Services Authority.
Landsbanki has a top-up agreement with the Financial Services Compensation Scheme, whereby savers with Icesave will have to claim the first €20,887 (approximately £16,000) directly from the bank’s home country, Iceland. The FSCS has then agreed to ‘top up’ anything above this amount to the agreed deposit guarantee of £50,000.
Financial experts however are warning that savers will have to “wait and see” whether they can claim the first tranche of savings from the Icelandic government. Sharon Bratley at Fairinvestment.co.uk says: “The worry is that as the Icelandic Government picks up the pieces of its banking system, the money just won’t be there to pay out a saver’s first €20,887.”