Icelandic Bank Customers Rescued by British Banks, Building Societies and Credit Unions
Customers who have faced significant losses during the Icelandic banking crisis can put their mind at ease as British banks, building societies and credit unions have recently announced that they will pay out over £1 billion to help them.
The payments fell due as a consequence of the Financial Services Compensation Scheme being unable to retrieve the entire amount owed by the estates of Icesave, Heritable Bank and Kaupthing Singer & Friedlander, based in Iceland.
At the beginning of the week, British lenders payed the FSCS the first instalment of £363 million, with two equal payments to follow in the next three years as stated by the British Bankers’ Association. The measure has been put in place by the Financial Services Compensation Scheme, who protect customer deposits in the event of bankruptcy.
According to Anthony Browne, chief executive of the British Bankers Association, “the UK banking industry is today picking up the tab for £1 billion of the costs of the Icelandic banking crisis. This compensation ensured that no savers who had money in Icelandic banks lost out.”
“These payments show that the system works and we hope it gives confidence to consumers” concluded Mr Browne.
An official representative of the British Bankers Association (BBA) added: “The fact that the industry is making these payments is further evidence that the UK’s banking industry continues to return to strength.”
In 2008, thousands of British Icelandic banks customers have had their savings secured through lendings guaranteed by the British Government, an amount which are now being fully compensated by banks and lenders, in the form of written cheques for up to £1.089 billion.
In order to meet these requirements, the National Treasury has provided the Financial Services Compensation Scheme substantial loans which need to be thoroughly repaid by April 2016.
Icelandic financial institution Icesave faced bankruptcy in fall 2008, which led to the Government being forced to compensate approximately 230,000 British customers to the full extent of their savings, which was estimated at around £3.5 billion. In light of the Icelandic banking crisis, the British Government has stepped in to ensure that in the future the customers’ money will be protected.
Joe Rundle, Trades Manager at ETX Capital, declared “the news is actually positive for the vast majority of savers who are guaranteed by the compensation scheme. It is our inherently sturdy, transparent and reassuring compensation scheme which provides comfort and confidence to savers who need protection, especially in times like this.”
Mr Rundle had also shown his disappointment towards the moment in time in which the British Government and financial institutions had to face such a situation: “It couldn’t come at a more difficult time for the UK banking sector.”