Kaupthing agressively marketed its saving accounts in Belgium, offering the highest APR available on the market. It was registered as a Luxemburg bank and operated under a Luxemburg licence. Insured deposit guarantees were pretty much the same in Belgium and Luxemburg prior to september 2008 (i.e. up to 20.000 €).

As the Icelandic banking meltdown was hotting up (like my metaphors?) Luxemburg chose to freeze Kaupthing Luxemburg’s assets because of a going concern. From that point Kaupthing savers had no more access to their bank accounts (though deposits were not refused). Now consider what happened next: Luxemburg had no intention of depleting its reserves of their banking meltdown insurance fund to compensate primarily Belgian customers and let that be known. Belgium had no intention of depleting its reserves because as this bank was registered in Luxemburg the insurance did not apply. Though every effort was made to say that somehow the savers would be made whole. Obviously Iceland didn’t care much but they were polite enough to receive savers delegations and delegations of various political institutions.

At the end of the day a buyer was found who would guarantee the deposits, but the deal collapsed on some technical (and probably political, as it was Khadafi offering his services) details. In the last few weeks another buyer has been found and not much detail has been released, except that everyone will get his money back. I suspect that both Belgium and Luxemburg will have oiled the deal, because the political benefit of not having to touch a much too small insurance fund in countries where many banks are teetering on the verge of collapse is immense.

Also, this should teach citizens something about the robustness of the freedom of capital markets and the financial services in the EU. Politicians you cannot vote for will not work their asses off to get you what you are entitled to.

Given the rates and the effective 100% guarantee of the funds, I wonder if anyone elected to break those fixed terms?

Icesave, I’m pretty sure, did not involve interest after 6th Oct on normal deposit accounts. Fixed rate accounts were paid their full interest on maturity.

KSFIOM & Landsbanki Guernsey aren’t going to get 100% of their deposits back, so interest isn’t really important. Not sure whether it accrues in insolvencies if there is enough to cover it or whether the amount owed is determined as at the date of receivership.

The Kaupthing Edge savings accounts appeared indeed like every other savings account and they did not offer exceptionally high yields. Their interest rates were just high enough to make it on top of the ranking list for call money but only marginally higher than for accounts, which were covered by the German depositors insurance scheme.

The German depositors initially were labelled as greedy investors by some populist German politicians and the German authorities didn’t seem to be too helpful at all.

There is an interesting twist to this story, which has come to light recently. Some of the money (ca. 55 Mio. EUR), which was intended to be paid to German Kaupthing Edge depositors last october, had been seized by the German DZ Bank as clearing institution of Kaupthing in Germany. As it seems, this money had been provided by Kaupthing the day before the collapse on an explicit request of the German authorities to provide liquidity. When this money arrived, it was snatched right away by DZ Bank, before the actual moratorium hit, because they had other investments with Kaupthing in danger of loosing. This seized money was the reason for ongoing quarrels and a considerable delay in the repayment process. So, the German authorities, willingly or by sloppiness, contributed to the plight of the German savers and helped the DZ Bank to obtain priority over other creditors.

But otherwise it is good to see, that this issue has been solved by and large.

And as the heat in Germany is very unpleasant at the moment, too, Icelandic hot weather is something, I consider beeing able to cope with pretty easily.