Economies: UK freezes Icelandic bank assets; intervenes in another division

The following is extracted from a UK Treasury statement issued 11.22 today.

The Chancellor has taken action today to protect the retail depositors in two Icelandic owned banks: Icesave, a UK-based branch of Landsbanki and Heritable, a UK-based banking subsidiary of Landsbanki. Savers' money is safe and secure.

The UK authorities expect that Landsbanki will soon be declared in default. Should that occur, the Chancellor has put in place arrangements to ensure that no retail depositor will lose any money as a result of the closure of Icesave. The Treasury and the Financial Services Compensation Scheme are working with the Icelandic authorities and their Deposit Insurance Scheme to ensure that depositors are paid back as quickly as possible. The Chancellor has also spoken to the Icelandic Finance Minister about the importance of the Icelandic authorities ensuring that UK depositors in Icesave are given the same protections as depositors in Iceland and receive their deposits back in full promptly.

Arrangements are being put in place to ensure that all ISA customers of Icesave will continue to benefit from the tax-free status of their accounts.

The Chancellor has also today taken steps to freeze assets of Landsbanki in the UK until the position with respect to the future of the firm and UK creditors becomes clearer.

Heritable is regulated by the FSA. The FSA has determined that Heritable no longer meets its threshold conditions, and is likely to be unable to continue to meet its obligations to depositors. The FSA concluded that it is in default for the purposes of the Financial Services Compensation Scheme.

Heritable's retail deposit business has been transferred to ING Direct, a wholly-owned subsidiary of ING Group. ING Direct is working to rapidly ensure that it is business as normal for all customers. The remainder of Heritable's business has been put into administration. Any retail depositors eligible to claim under the Financial Services Compensation Scheme whose business has not been transferred to ING will be paid out in full through the Financial Services Compensation Scheme.

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