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Icelandic Government agrees to honour its depositor scheme; In association with

Iceland has agreed to cover nearly the first pounds 18,000thatUKsavers lost through the collapse of internet bank Ice save.

It is thought the pledge was key to the country securing a pounds 2 billion (pounds 1.36 billion) loan from the International Monetary Fund.

Around 230,000 Britons lost money in Icesave when parent company Icelandic bank Landsbanki was put into receivership last month.

The Icelandic depositor protection scheme should have covered the first EUR20,887 (pounds 17,844) people lost, with the UK's Financial Services Compensation Scheme (FSCS) topping this up to the firstpounds 50,000. But in the aftermath of the collapse, Iceland appeared to be planning to compensate only domestic depositors, leading to the UK Government freezing assets of Icelandic banks.

There was concern even if the country did honour the agreement, there was not enough money in the depositor protection scheme to cover payouts.

On October 8, the UK Government stepped in to guarantee all money lost by UK savers above pounds 50,000, transferring pounds 800 million to the FSCS this month to fund payouts.

But Iceland has said it will pay foreign depositors the first EUR20,887 as it is obliged to do. Icelandic Prime Minister Geir Haarde was quoted as saying: "The way had now been opened for a loan from the IMF. According to agreed guidelines, the Government of Iceland will cover deposits of insured depositors in the Icesave accounts in accordance with EEA European Economic Area law."

The next step will be for talks to be held with the UK and other countries whose savers have lost money with the bank over how payments will be made.

A Treasury spokesman said: "The UK Government has always supported an IMF loan to Iceland and would welcome any progress that would see resolution for British retail depositors and equal treatment for creditors."

Meanwhile, the FSCS said it had so far paid out pounds 250 million to savers.

The scheme is using a new accelerated online claims process.

Under the new system consumers complete a short electronic process through the Icesave website enabling them to designate an account into which they want money paid.

The FSCS said initial indications from its low volume trial, which started last week showed it took people less than four minutes to effect the transfer, with few requiring telephone assistance.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Nov 18, 2008
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