Icesave: how safe are your savings? Facts and myths

olimonsta

Is it just me or does anyone think the outlook here is about as bleak as the image on the Icelandic Depositors’ and Investors’ Guarantee Fund website (the Icelandic version of the FSCS)?

If Icesave has 300,000+ UK customers, the money needed to return funds is going to run into the £billions. Even if they can borrow from Russia (and from what I've read they haven't managed to) will it be enough?

While Icelandic Prime Minister Geir Haarde may guarantee all 'domestic deposits', it's hard to see where the money is actually coming from and who are Iceland going to save first - the 300,000+ UK customers or the 313,000 Icelandic population?...

"It is every country for itself... We want to save what can be saved," Haarde said, as quoted by Bloomberg.

Russia defaulted on it's national debt many years ago simply by choice, does Iceland even have a choice?

However, as a wise person once said... After looking at the negatives it's important to look at the positives. There are some definite positives to take out of this situation:

1) This is the first potential claim on the Icelandic compensation scheme. On a first come first served basis, it could be that Icesavers are better placed than any that follow.
2) Should Iceland be unable to cope, it apparently has reciprocal agreements with other Nordic countries that will step in to provide financial support.
3) Being the first case, the Icelandic Government should be keen to secure a positive outcome to demonstrate strength in their financial system.
4) The Icelandic compensation scheme aims for speedy settlement, I think within 2 months.
5) The involvement of the FSCS helps as the FSCS will want to demonstrate strength of the claims process.
6) At least there is a compensation scheme in place so there is in theory a system to deal with this. Imagine if there wasn't any system at all.
7) After what happened to Northern Rock which is now a rock solid institution it goes to show that anything could happen.

The article in Meher's post is definitely worth a read.

So now that it's hitting the fan, I think the best we can do is wait and see what the outcome is.

I hope those who depended on access to their Icesavings find a way to get by and also major props to Martin for the quality of information available on this site.

Good luck everybody.

born2run

Olimonsta this is a nagging question for me too - even though we have had a quote from their PM i.e.

"In a press conference today Iceland's Prime Minister, Mr. Geir H. Haarde, said that if needed the Icelandic Government will support the Depositors' and Investors' Guarantee Fund in raising the necessary funds, so that the Fund would be able to meet the minimum compensation limits in the event of a failure of an Icelandic bank" (Iceland Depositors' and Investors' Guarantee Fund website)

who trusts a politician?

At the same time I can see nothing from the FSCS that clarifies what would happen if there were a full or partial default - in fact when I phoned them yesterday I was told they were only responsible for the incremental amount above 20odd thousand euros although I have seen this quote today,

Clare Francis, editor of the personal finance website moneysupermarket.com, said: "The good news for British customers is that even if the Icelandic scheme does not have enough money set aside, the rules mean that the British authorities will step in to cover all the shortfall."

although I don't have a copy of the 'rules' she's referring to to verify.

Like you say it would be curtains for the Icelandic banking system if they did hang us out to dry - there are lots of other Nordic country depositors who would also lose out
so it is almost inconceivable that it could happen (although they've got to raise the dosh!)

Also if it did and the FSCS said 'tough' then this too would have major implications.

So not wanting to be too pessimistic although I'll be a lot happier when I can see everything in black and white from a 100% reliable source.

Dan_66

Icelandic Banks: Deposit Insurance

• If an Icelandic bank fails UK customers are protected up to £50,000
• The first £16,170 of their money is protected by Iceland
• The remaining £33,830 is protected by the UK government
• If Iceland goes bankrupt, the UK will not cover the first £16,170
• Joint accounts will be protected up to £100,000

I'm not tryng to scaremonger here but the above is taken from SKY News website.

I think that we should be viewing the so-called Icelandic passport compensation scheme as:-

'Any savings up to the first £16,170 in ICESAVE will be lost' Any amount over this willl come from the FSCS in the UK up to £50,000.

So, assuming you have £17,000 in ICESAVE you will receive (eventually) £830 from the FSCS and a big fat zero from ICELAND should it go Bankrupt!

born2run

So there you have it in the red corner the editor of moneysupermarket.com and in the blue corner the Sky news website. Who's right? God knows!

meher

the guardian is not positive

Dan_66

What could go wrong? Well quite a lot as it transpires – as there are now serious doubts over whether the Icelandic authorities have enough money in the kitty to reimburse an army of British savers. Not surprisingly the their first priority for the Icelandic regulators will be putting their own tottering economy on a firmer footing and then making sure their own vote-wielding savers are not left out of pocket. British savers are likely to be far further down the list.
No-one knows as yet whether there will be sufficient funds in Iceland to make good their pledge to safeguard this money.
And let's face it, as the vast majority of savers will have far less than £16,200 in the bank, they will be purely dependant on the Icelandic compensation scheme.
So will the FSCS step in to help if Iceland is unable to meet its statutory obligations? At present it doesn't look like it. A spokeswoman for the FSCS said: "Icesave is not a British bank. We are obliged to top up the compensation to £50,000 but only above £16,000."
In other words if you have £50,000 in the Icesave – and Iceland's compensation scheme does not pay out – at least you will get £34,000 refunded. But if you have £10,000 or £15,000 in the bank you lose the lot. It is the smaller saver who stands to lose the most.
This seems a most iniquitous position – particularly as this is supposed to be a statutory protection.
Of course, this situation will not arise if, as hoped Iceland compensation scheme works smoothly. But it has been disappointing to hear very little from the FSCS, the Financial Services Authority and the Treasury about what they will do if it does not. Some reassurance at such a worrying time for savers would be welcome.
But one thing is certain, regardless of whether the Icelandic authorities or the British ones do eventually foot the compensation bill, it will be months – possibly a year or more – before Icesave's customers see their money again.

Sorry, again justtryng to put the latest info to hand on here for everyone. The above from the Telegraph at 19:02 7/10/08

cornubian

When I opened my ICESAVE account in September 2007, this message was on the ICESAVE site:

Deposits made with Icesave are protected under the Icelandic Deposit Guarantees and Investor-Compensation Scheme (details of this scheme may be obtained from https://www.landsbanki.com/legislation). Payments under this scheme are limited to the first €20,887 (or the sterling equivalent) of your total deposits held with us.

You have further protection from the UK Financial Services Compensation Scheme (https://www.fscs.org.uk). Payments under this scheme are limited to 100% of the first £2000 of all your deposits with us, plus 90% of the next £33,000 of your total deposits with us, less any payments made under the Icelandic scheme. This means that the maximum claim amount as at June 2006 is £31,700.
http://www.icesave.co.uk/financial-protection.html

In July 2008, ICESAVE posted this notice on its site:

"Peace of mind with Icesave:
Part of international banking group, Landsbanki
Regulated by the FSA
Subscribers to the UK Financial Services Compensation Scheme
Subscribers to the Banking Code"
http://www.icesave.co.uk/easy-access-isa.html



Quite clearly, the message is that my money has a double guarantee of safety. Now we are hearing that the FSCS only compensates for sums lost between €20,887 and £50,000. The questions is, why did the UK FSA and FSCS allow ICESAVE to operate in the UK on the strength of misleading guarantee information and is there a degree of liability here?

born2run

On many levels I think it was reasonable for a UK depositor to interprate from all the information given that his/her deposits were protected as much in Icesave as they were in any other UK bank i.e. up to the relevant FSCS levels. Although it is clear that in the first instance compensation should be provided by the Icelandic scheme there was never any indication that failure by this scheme would result in the secondary protection of the FSCS having a £16k hole in it.

We'll have to wait and see how this all plays out - they've not even said they're insolvent yet, in fact they've not said anything:mad: .

However if the worst case scenario unfolds i.e. they go bust and Iceland don't pay and then the FSCS don't step in I'm sure lawyers would be clamouring for this case!!

Annpan

born2run wrote: »

On many levels I think it was reasonable for a UK depositor to interprate from all the information given that his/her deposits were protected as much in Icesave as they were in any other UK bank i.e. up to the relevant FSCS levels. Although it is clear that in the first instance compensation should be provided by the Icelandic scheme there was never any indication that failure by this scheme would result in the secondary protection of the FSCS having a £16k hole in it.

We'll have to wait and see how this all plays out - they've not even said they're insolvent yet, in fact they've not said anything:mad: .

However if the worst case scenario unfolds i.e. they go bust and Iceland don't pay and then the FSCS don't step in I'm sure lawyers would be clamouring for this case!!

This had crossed my mind on the interpretation of the compensation awarded or not by the Icelandic scheme, but then I thought, surely those with meagre savings, say in an single ISA would not be penalised for having less than £16,000? There will be trouble aplenty if that is the case. The compensation won't be worth the computer screen it's written on!

badpontius

This is very worrying. I had £15k in the Icesave internet easy access account and tried to close it on Sunday night. From whatI am reading here, I am not expecting to see the cash credited to my bank account tomorrow. This money was meant to pay a tax bill in January and we have no money anywhere else to pay the bill:( That said, I can't see that the Icelandic compensation scheme would be liable for the full 300,000 customers x £16k. After all, Landbanski had some assets and the Icelandic PM said that the Bank's deposits could cover 60% of its liabilities...will we get to see some of that or will the locals get it all? Second, I do believe that we are going to have to make a lot of noise to persuade the UK government to pay the full £50k in the event that the Icelandic government does the dirty on us. I for one would be happy to march on Downing St and I think we should be prepared to marshall our forces once we hear what will happen. In the meantime, if the Government prevaricates in any way we should lobby our MPs and make enough noise to ensure that the issue does not get lost in the daily dripfeed of bad news that now seems to be occurring.