Worries for UK internet savers as Icelandic bank is nationalised
Tuesday 07 October 2008
Internet bank Icesave today stopped savers withdrawing their cash after its parent company was nationalised by the Icelandic government.
The Icelandic Financial Supervisory Authority issued a statement saying the country's government had taken control of Landsbanki.
It sought to reassure domestic savers that their money was fully guaranteed by the government, adding that domestic branches, call centres, cash machines and internet operations would be "open for business as usual".
But the guarantee does not extent to UK savers and people logging on to Icesave's website were greeted with a message telling them that the group was not currently processing any deposits or any withdrawal requests on its internet accounts.
The nationalisation of Landsbanki is the latest twist in the financial turmoil which is sweeping the world.
Fears over the health of Icelandic banks had been growing in recent weeks as the country wrestled to maintain stability in its financial sector.
Iceland's prime minister Geir Haarde warned yesterday that the island faced the "real possibility" of "national bankruptcy", as its economy could be sucked into the "global banking swell".
His comments came as the country's parliament passed emergency legislation yesterday in an attempt to restore stability to its banking system, while trading in the country's six biggest financial institutions was temporarily halted.
Under the legislation, Iceland's financial regulator will have the power to dictate banks' operations, including forcing them to sell overseas assets or merge with rivals.
The Icelandic Financial Supervisory Authority said in its statement that the nationalisation of Landsbanki was "a necessary first step in achieving the objectives of the Icelandic government and parliament to ensure the continued orderly operation of domestic banking and the safety of domestic deposits".
It is not known how many UK consumers hold money with Icesave, but it is thought that as many as 300,000 people in this country have savings with an Icelandic institution.
Money is mainly held with Icesave and Kaupthing Edge, the UK retail arm of Iceland's biggest bank Kaupthing.
If an Icelandic bank failed, savers would still have the first £16,170 of their money protected under the Icelandic savers compensation scheme, with the sum topped up to £50,000 for individuals, or £100,000 for joint account customers, by the Financial Services Compensation Scheme (FSCS).
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