Iceland approves UK payout after Icesave collapse claim

Iceland gives green light to €3.8bn payout after UK and Dutch governments compensated savers

Iceland's parliament yesterday narrowly approved a Bill that will pave the way for Britain and the Netherlands to recoup the €3.8bn (£3.4bn) lost by customers of the online savings bank Icesave, which collapsed under a mountain of debt in 2008.

Under the deal, which is deeply unpopular with Icelanders, the two governments will receive payments over the next 14 years after compensating the losses of more than 320,000 of the bank's customers. In the UK, deposits of up to £50,000 were guaranteed by the Government under the Financial Services Compensation Scheme.

Savers were attracted to the high interest rates offered by online Icelandic banks in the run-up to the credit crisis in 2008. Landsbanki, which operated Icesave, Kaupthing and Glitnir all collapsed after the wholesale banking markets – where the banks funded themselves on cheap debt – imploded after the failure of Lehman Brothers. Kaupthing's savings arm, Kaupthing Edge, was later rescued by ING Direct after the Financial Services Authority closed its London operations.

A Treasury spokesman said yesterday that the vote brought an end to the dispute. "The UK welcomes this latest step taken by the Icelandic government to draw a line under the financial crisis. This action, along with support from the IMF, EU and Nordic countries, will enable Iceland to recover confidence in international markets and focus upon economic recovery."

In a statement posted on his ministry's website, the Dutch Finance Minister, Woulter Bos, said: "This is very good news on the last day of the year. It hasn't been an easy process, but Iceland takes its responsibility and that also deserves a compliment."

Yesterday's vote was backed by just 33 Icelandic MPs, with 30 voting against the measure. The €3.8bn represents 40 per cent of Iceland's total gross domestic product, while a poll in August showed that 70 per cent of Iceland's 320,000 citizens were against the Bill.

Iceland's Finance Minister nevertheless hailed the vote: "Approving the Bill is the better option and will avoid even more economic damage," said Steingrimur Sigfusson, who is also the leader of the Left-Green party. "History will show that we are doing the right thing."

The deal does not cover a number of UK local authorities, which invested more than £900m in the Icelandic banking system in the years leading up to the onset of the banking crisis. So far, less than 10 per cent of investments have been refunded to councils such as Kent, which had deposits worth £15m, and Nottingham, which invested £11m.

Last month Stephen Jones, the finance director of the Local Government Association (LGA), attended a Glitnir Bank creditors' meeting after the bank's winding-up order named UK councils simply as "general unsecured" creditors, rather than "priority" creditors, triggering worries that councils could get back as little as 25 per cent of their money. In Landsbanki's winding-up order UK councils were made priority claimants.

Yesterday, a spokesman for the LGA said that nothing had changed since the December meeting, and that discussions were ongoing.

Iceland's economy has been one of the worst hit by the financial crisis, resulting in the near-collapse of Iceland's currency, the krona, and a deep recession: economic activity fell by more than 8 per cent in 2009 and is not expected to grow again until next year.

As well as a number of savers initially losing vast amounts money, the row with the UK and the Netherlands held up International Monetary Fund payments to assist Iceland's battered economy and stalled talks on the country's membership of the European Union.

Iceland has now signed up to a $10bn IMF-sponsored aid package.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
News
Ernesto Che Guevara and Fidel Castro, right, met at Havana Golf Club in 1962 to mock the game
newsFidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
News
Hackers revealed Oscar-winning actress Lawrence was paid less than her male co-stars in American Hustle
people
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?