James Daley: Who's to blame for the Icelandic banking mess?
Saturday 25 October 2008
When Gordon Brown and Alistair Darling were talking tough to Iceland a few weeks ago – seizing the UK assets of Icelandic banks and promising to stand behind all UK savers with money in those banks' accounts – I felt a great national pride. After all, the Icelandic Government had apparently told us that they had no intention of honouring their obligations in the UK – even though hundreds of thousands of savers had deposited money in the UK subsidiaries of their banks.
Once the assets had been seized, of course, both banks inevitably collapsed. But with UK savers' money secure, it felt like our Government had done the right thing.
Over the following days, however, it started to become clear that there were a number of victims who were not going to get much, if any, of their money back. For a start, the dozens of local authorities who had stuck council taxpayers' money into Landsbanki and Kaupthing were told they would not be reimbursed by the UK Government. Then there were the thousands of individuals who had put their money in Landsbanki and Kaupthing's offshore operations – most of whom were UK nationals, but who would also not qualify for the British Government bail-out because the Isle of Man and Guernsey are independent territories.
As these angry groups realised that they may be hung out to dry, they began to question whether Britain had taken the right decision to seize the Icelandic banks' assets in the first place.
The answer appears to come down to whether the Icelandic government really ever did threaten to walk away from its banks' UK liabilities. Iceland now claims it said no such thing, and has challenged the British to provide proof that it did. Furthermore, some Icelandic bankers have suggested that had Britain not intervened in the way it did, these banks would not have collapsed at all – and no one would have lost a penny.
The savers who lost money in the offshore subsidiaries of Kaupthing and Landsbanki understandably feel aggrieved. Though offshore banking tends to be associated with wealthy tax dodgers, many of the savers in question were simply ordinary UK citizens who worked overseas and could not open UK savings accounts while they were not resident here. Instead, they opted for banks as close to home as possible – and paid dearly for making the wrong choice. Many now stand to lose their entire life savings, and are furious that their own Government will not stand behind them.
However, if the British Government had not intervened, I would quite agree with Darling's decision to turn his back on these savers. After all, if you put your money in a French bank that went bust, you wouldn't expect the British Government to bail you out. So why should it be any different for the Isle of Man and Channel Islands, which are not really any more a part of the UK than France is? Savers should have checked what protection their money would be afforded. And if they were advised to put it there, and were told it was safe, then they should sue their adviser. But why should Britain bail them out?
If, however, the British Government's actions – which included the use of anti-terrorist legislation to seize the Icelandic banks' assets– were part of the problem, then we must certainly bear the responsibility to compensate these people. Sadly, it may take class actions and years in the courts to ever prove such an accusation, by which time some of those affected will have been forced to declare themselves bankrupt. A sorry situation.
Questions of Cash: Bupa costs bore no relation to what I'd been quoted
Five Questions On: Pensions advice
Problem gambling: Amid heavy advertising and a surge in remote sports betting, more and more 16 to 24-year-olds are now seen as 'at risk'
Gardens add a tenth to the value of your home
Simon Read: Retirement advice is good - if it's impartial
- 1 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 2 Students offered grants if they tweet pro-Israeli propaganda
- 3 Satellite full of sexually experimental geckos adrift in space, Russia loses control of mission
- 5 Israel has discovered that it's no longer so easy to get away with murder in the age of social media
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
A day in the life of Vladimir Putin: The dictator in his labyrinth
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar