James Daley: Who's to blame for the Icelandic banking mess?

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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future