FSCS to borrow more from BoE for Icelandic crisis - Iceland to use loan from UK

SephirothX

I'd still like to know what's happening with interest. My annual payment was due today and didn't show up.

nilrem_2

Sorry to be a thickie but why do we have to give them £100,000,000 so that they can give us our cash back?

dwileflunker

nilrem wrote: »

Sorry to be a thickie but why do we have to give them £100,000,000 so that they can give us our cash back?

Because by doing it that way Iceland will then owe that money to the UK, which hopefully will repaid some time in the future although probably a long way in the future. If the government simply compensated the UK Icesave account holders then recovering that money from Iceland wouldn't be as straight forward as an agreed loan.

cwcw

TehJumpingJawa wrote: »

Only problem with them doing that, is that transfering ISA's takes so bloody long at the moment.
Meaning ISA savers will be stuck with deciding between leaving the cash in Icesave for ~1 month while the transfer goes through, or withdrawing it immediately and forfitting the tax free wrapper.

I've suggested the idea before. There'd be no problem leaving the money in Icesave while the ISA transfer went through. It would all be 100% government backed, quite literally. The FSCS could put a time limit on Icesavers to get their accounts emptied - say, 6 months.

Guesthouse

TehJumpingJawa wrote: »

Only problem with them doing that, is that transfering ISA's takes so bloody long at the moment.
Meaning ISA savers will be stuck with deciding between leaving the cash in Icesave for ~1 month while the transfer goes through, or withdrawing it immediately and forfitting the tax free wrapper.

If you're saving, then you aren't looking at taking the money out so other than the loss of some interest (and I don't know if we have the full story on when interest will cease to be accrued & paid yet) what's the hurry?

sanfly

nilrem wrote: »

Sorry to be a thickie but why do we have to give them £100,000,000 so that they can give us our cash back?

Do not understand this figure, as if reports are right and there was 300,000 icesave clients, then unless my maths are wrong then this equates to approx £333.33 each........... if this figure is right, whats the point?

Seajays

nilrem wrote: »

Sorry to be a thickie but why do we have to give them £100,000,000 so that they can give us our cash back?

The money is just a short term loan (secured on the frozen assets) to allow the bank to keep operating in order to provide an "orderly wind down" of operations while they pay back all the creditors etc. Someone has to do all the work in turning those £4billion worth of assets into cash. From Bloomberg:

Chancellor of the Exchequer Alistair Darling said the Bank of England will provide a short-term loan of 100 million pounds ($174 million) to Landsbanki Island hf, to help the Icelandic bank repay depositors in the U.K.

"The Bank of England is today providing a short-term secured loan of up to 100 million pounds to Landsbanki, to help maximize the returns to U.K. creditors," Darling told lawmakers in Parliament in London today.

Britain's Treasury froze some of the bank's assets in the U.K. last week as Icelandic authorities seized the nation's banking industry. U.K. Prime Minister Gordon Brown on Oct. 9 threatened to freeze all Icelandic company assets unless the issue was defused.

"We need to try to resolve this problem with Iceland," Darling said at a press conference in London earlier today. "They cannot get into this position where they cut off everyone who does not happen to be in Iceland. In the meantime we are taking steps to preserve the assets we have in this country."

The U.K. government sent a delegation to Reykjavik on Oct. 10 in an attempt to end the rift over who will compensate British depositors with money in Iceland's collapsed banks.

The loan will be secured against the Landsbanki assets in the U.K. that were frozen last week, said Michael Ellam, a spokesman for Brown.

http://www.bloomberg.com/apps/news?pid=20601102&sid=afVmQ4mcm5Vs&refer=uk

See also: http://www.bankingtimes.co.uk/13102008-treasury-lends-100m-to-landsbanki/

Stavros_3

It seems total madness for our government to loan Iceland millions to pay back our uk savers. I would have thought it far easier to take it all from the Billions we have seized in the UK, we live in a mad mad world

bobgarrod

Question to all those being sanctimonious about Govt bailing out Icesave savers. What is actually the difference between this money and the billions spent propping up Northern Rock Bradford and Bingley and now all the major banks bar HSBC. The bill is going to come to something like £500 Billion to be paid out of taxes eventually. Icesave looks like it will be eventually neutral on taxes - Landasbanki assets held exceed liability to depositors. So all you smartarses who wisely invested in Hbos,Lloyds, RBS, B&B and Northern Rock - you seem to be being supported by Icesave savers.

Seajays

Stavros wrote: »

It seems total madness for our government to loan Iceland millions to pay back our uk savers. I would have thought it far easier to take it all from the Billions we have seized in the UK, we live in a mad mad world

They haven't 'seized' them though. The government have used legislation to freeze the assets. That doesn't make them legally ours, it just prevents the true owners doing anything with them. What the government is now doing is putting in place an agreement to ensure we get our money back once those assets are 'unfrozen', using those frozen assets as a bargaining chip to ensure we get what we want.