Iceland - How the money was returned to savers & who pays

baby_boomer

Telegraph

"The Treasury has revealed that it was forced to pay out £7.4bn to savers who lost their money in the Icelandic banking crisis last year.

The Government stepped in to help more than 300,000 UK savers with Iceland's biggest banks, after Kaupthing and Landsbanki collapsed last October. Figures released in Wednesday's Budget, show that the Treasury had to give £3.3bn to savers with money in Kaupthing Singer & Friedlander and Landsbanki's Heritable Bank, while compensation is expected to reach £4.5bn for savers with money in Icesave accounts.

The bulk of the £7.4bn was a loan to the Financial Services Compensation Scheme, which is responsible for covering the first £50,000 lost by depositors. The FSCS is funded by an industry levy on both state-owned and private financial institutions.B]So this will be paid for by poorer rates paid to other savers over the next three years . [/B

Another £2.3bn of the payments represents a [taxpayers'] loan to the Icelandic Government, which will cover the first €20,887 (£18,600) lost by Icesave depositors because the bank was under its regulatory system. A loan repayment schedule has not yet been agreed between the countries - [So this may yet be taxpayers' money down the drain . ]

A Treasury spokesman said it was confident that most of the £7.4bn would eventually be returned to the Treasury...."

Money_Grabber13579

Sure what's £7bn considering the national debt is in excess of £600bn? What a fine mess the labour government has stuck us in...

dunstonh

The Govt only loans the money to the FSCS. All financial services companies have to pay it back. Not just the banks. There is pressure to keep the bulk of the liaiblity with the banks but we are all looking at higher levies for many years.

oxenryd

baby_boomer wrote: »

Telegraph

"The Treasury has revealed that it was forced to pay out £7.4bn to savers who lost their money in the Icelandic banking crisis last year.

The Government stepped in to help more than 300,000 UK savers with Iceland's biggest banks, after Kaupthing and Landsbanki collapsed last October. Figures released in Wednesday's Budget, show that the Treasury had to give £3.3bn to savers with money in Kaupthing Singer & Friedlander and Landsbanki's Heritable Bank, while compensation is expected to reach £4.5bn for savers with money in Icesave accounts.

The bulk of the £7.4bn was a loan to the Financial Services Compensation Scheme, which is responsible for covering the first £50,000 lost by depositors. The FSCS is funded by an industry levy on both state-owned and private financial institutions.B]So this will be paid for by poorer rates paid to other savers over the next three years . [/B

Another £2.3bn of the payments represents a [taxpayers'] loan to the Icelandic Government, which will cover the first €20,887 (£18,600) lost by Icesave depositors because the bank was under its regulatory system. A loan repayment schedule has not yet been agreed between the countries - [So this may yet be taxpayers' money down the drain . ]

A Treasury spokesman said it was confident that most of the £7.4bn would eventually be returned to the Treasury...."

Am I guessing that you didn't have any money in an Icelandic bank ?

I hope for you that you never have any money in a bank that fails.

RayWolfe

Money_Grabber13579 wrote: »

Sure what's £7bn considering the national debt is in excess of £600bn? What a fine mess the labour government has stuck us in...

Oh so the failure of Icelandic banks was the fault of the UK government. You learn something new every day.

evenasus

Maybe the OP is making the point, that the government need not have reimbursed the Icesave savers the whole amount of their savings.
After all, the savers knew what they were doing when they put their money in there.
If the rules had been stuck to, the bill to the taxpayer wouldn't have been as high.

Milarky

And remember that Icesave was collapsed exactly one day after the compensation limits were raised from 35K to 50K by the treasury (Just a coincidence of timing? Maybe. But is also meant the industry levy element of the final bill was 40% or so greater than it would have been if this had happened a day earlier)

Money_Grabber13579

RayWolfe wrote: »

Oh so the failure of Icelandic banks was the fault of the UK government. You learn something new every day.

No, I didn't say that. But the national debt is the fault of the government. Maybe you should have learnt to read today instead of learning about something that wasn't said.

tradetime

Milarky wrote: »

And remember that Icesave was collapsed exactly one day after the compensation limits were raised from 35K to 50K by the treasury (Just a coincidence of timing? Maybe. But is also meant the industry levy element of the final bill was 40% or so greater than it would have been if this had happened a day earlier)

Whilst I am one of the worlds worst "disbelievers of coincidence" I'd say in this case it probably was, as the government were honoring amounts in excess of £50k anyway, thus it was unnecessary to raise it for that. They may have rushed it to limit the chances of a run on any other perceived weak banks in the UK.

nilrem_2

evenasus wrote: »

Maybe the OP is making the point, that the government need not have reimbursed the Icesave savers the whole amount of their savings.
After all, the savers knew what they were doing when they put their money in there.
If the rules had been stuck to, the bill to the taxpayer wouldn't have been as high.

Paradoxically the bill to the taxpayer would have actually been much higher for the simple reason that if savers had lost money saved with Icesave it would have caused mass panic with savers who had cash with other institutions, many withdrawing their savings causing a massive run on the banks and building societies the outcome of which would make the run on Northern Rock look like robbing a piggy bank.

And FWIW savers with Icesave did know what they were doing as the bank was fully authorised by the FSA and run from the UK, it was also endorsed by the media and advised as being as safe as any UK bank.

Milarky

nilrem wrote: »

Paradoxically ... it would have caused mass panic with savers who had cash with other institutions, many withdrawing their savings causing a massive run on the banks and building societies the outcome of which would make the run on Northern Rock look like robbing a piggy bank.

Would these be mostly the 96% of people with less than the (lower) £35K limit - who were covered - or just the 4% of savers with more than that moving, perhaps, 2% of total balances around the various banks? Remember at the time of the 'run' on NR only the first £2000 was fully covered. Those circumstances did not apply when Iceland's problems came along.