Icesave customers still out in the cold

Published on Saturday 11 October 2008 18:40

MORE than 300,000 frantic savers with the collapsed Icelandic bank Icesave may have to wait for another week to establish when and how they will get their money back.

Unlike depositors with Kaupthing Singer & Friedlander, another Icelandic bank to hit the rocks last week, Icesave investors were not fully protected by the UK Financial Services Compensation Scheme, but in theory have to look to the Icelandic government for compensation.

However, such funds do not exist and are unlikely to be forthcoming, given the precarious state of the country's finances. This highlights in Technicolor the dangers of investing in a faraway place of which we know little, even if it pays an attractive return.

Many could have lost all their savings when the Landsbanki subsidiary was declared in default on Wednesday, had Chancellor of the Exchequer Alistair Darling not announced he would guarantee that no UK saver lost money.

Yet guaranteeing the money and producing it seem to be two different things.

FSCS chief executive Loretta Minghella said: "We know that many savers with Icesave are anxious about their savings. Following the Chancellor's announcement, retail depositors can be confident they will be repaid in full.

"We are working closely with all concerned on the practical arrangements to get people their money back as quickly as possible."

What is clear is that neither the FSCS nor the Chancellor is willing to write cheques speedily to give investors their money back.

There is still no information about whether investors should make one claim for compensation or separate claims to the FSCS, the Government and Iceland, and this may not be resolved for several days.

An FSCS spokesman said: "We and the other UK authorities involved have been working together and with the Icelandic authorities to establish the best process for getting you your compensation entitlement, having regard to the Icelandic Fund's responsibilities, our own obligations and the Chancellor's announcement."

Elsewhere, the retail deposits of 180,000 customers of Heritable and Kaupthing Singer & Friedlander have been safeguarded after they too were declared in default.

Savers with Heritable, a subsidiary of Landsbanki Islands, and those with Kaupthing Singer & Friedlander, a banking subsidiary of Kaupthing Bank, have mainly been transferred to ING Direct.

Kaupthing savers were in a different position from those with Icesave because the bank was fully authorised by the UK Financial Services Authority, and as such had equivalent call on the FSCS as any British bank.

However, only internet customers have been transferred to ING Direct, which leaves about 3,000 Kaupthing savers and 100 Heritable savers in the lurch. They will now have a full claim on the FSCS, which has indicated it will contact these depositors directly in the next week with the help of the administrators and send them an application form to claim compensation.