If you have put some of your savings in Icelandic banks, then yesterday’s news would have left you feeling rather cold.
The 300,000 of you with savings deposited in Icesave, the Icelandic internet bank, have found that you are blocked from withdrawing any money from your account.
The move follows the decision by the Icelandic Government to take control of Landsbanki, Icesave’s parent company, which has been engulfed in the worldwide financial chaos. It collapsed on Tuesday morning and is now being run by the Icelandic Financial Services Authority, the Fjármálaeftirlitið (FME).
The Icesave website was frozen from early Tuesday morning, leaving many of you angry about the situation and lack of information. A source close to Landsbanki warned that it was unlikely the website would return to normal.
Alistair Darling, the Chancellor, has said he is making a commitment to the 300,000 of you affected by the Icesave situation.
The Chancellor’s guarantee means that you will not lose out even if you have more than £50,000 in an Icesave account. Last week, the Government increased its guarantee to savers from £35,000 to £50,000.
Mr Darling refused to extend explicitly his commitment above the £50,000 to any other institution which runs into trouble.
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Below we try to examine some key questions about the Icesave situation.
- Can I withdraw my money now?
No. Icesave's website says it is "not currently processing any deposits or any withdrawal requests".
The move follows the decision by the Icelandic Government to take control of Landsbanki, Icesave’s parent company after it was put into receivership yesterday.
- When can I withdraw my money?
Nobody knows. A spokeswoman for Icesave said: “We are waiting to find out what is happening from the Icelandic Government.”
No. The Icelandic Government is battling to save Landsbanki and other major banks. As long as it has not been declared bankrupt, you cannot make a claim on any guarantee scheme.
- What happens to my money if Icesave does collapse?
Wait and see. If Landsbanki is officially declared in default, the FSCS steps in. In theory, you will have to apply to Iceland's scheme for the first €20,887 (£16,000) of any claim, and then to the UK scheme for any sum over that amount, up to a maximum of £50,000.
- But will the Icelandic scheme be able to pay out?
A very good question. The Icelandic scheme has only £88 million to cover £13 billion of savings deposits. The Icelandic Government is supposed to cover any shortfall, but can it really guarantee deposits that total twice its GDP? Probably not.
If they can’t they might reimburse you with puffins instead…
- What if the Icelandic Government can’t pay?
Icesave says that Sweden, Norway and Denmark are committed to backing Iceland in an emergency, but only as a last resort.
- Will the treasury bail us out?
Highly unlikely. The Treasury said Icesave was Icelandic, so the prime responsibility lay with Iceland. The Treasury had no plans to go beyond fulfilling its obligations under the deposit guarantee scheme.
- I have savings with Kaupthing Edge. Should I worry?
Then you are in a better position thanks to Kaupthing’s link with Singer & Friedlander. It qualifies in full for the UK’s £50,000 scheme.
- I managed to withdraw my money from Icesave yesterday, but it says it takes four days to transfer. Will it come through?
Who knows? With the transfer process taking several days and things grinding to a halt yesterday, there is a sizeable chance that your money will be stuck in the system.
- Is there a helpline I can call?
No. Icesave said that you should keep checking the website for information.
(9.10.08 Latest Update: The UK government has stepped in to guarantee 100% of your money in Icesave after it emerged that the Icelandic government was refusing to meet its obligations to UK savers and Icesave was placed in default.
The default declaration triggers action from the FSCS, which will write to you outlining what they need to do to reclaim your money. It is not clear how long it will take for pay outs to be paid, but the FSCS warned that it could take up to four months)
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