A reader who calls himself Strategist left this comment below a recent post:
Hi Alda, from London
I haven’t posted on this site before, but I think it’s really great, thanks very much for it. Now my first post is to ask a favour – I’d be very grateful if you or one of your regular visitors could help with a query.We are currently having a very poorly informed argument on the British ‘Liberal Conspiracy’ website about the Icesave debacle (at http://liberalconspiracy.org/2010/01/06/iceland-is-ripping-us-off/ )
[*Health warning* It gets quite rude about Iceland and Icelanders in places...]
After 2-3 days of “debate” we have been completely unable to resolve a fundamental question about the Euro2.6bn/US S3.2bn/GB£2.2bn loan that UK is now claiming repayment on from Iceland. Which is: does this sum cover the cost of reimbursing the first Euro21k/GB£18k of British deposits in Icesave, or is it the cost of reimbursing all the value of deposits in Icesave (every last penny, including those organisations that had millions deposited in Icesave)?????? #
As an example, the Manchester cancer hospital Christies Hospital had £6.5m in charitable donations deposited in Icesave. For that particular account, has the British Government now sent Iceland a bill for £6.5m, or for £18k?
We have had conflicting comments and lots of abuse* but nothing definitive on what is really a simple question. Are you able to help? Many thanks in advance.
(* I really had no idea that there was such anger at Iceland and Icelanders in UK! Maybe that Cod War era propaganda affected us in our formative years…..)
I’m not an expert, but my understanding is that the sum covers only the minimum amount – up to the EUR 20K.
However, I suspect the point about Christies Hospital is slightly erroneous, because as far as I know charities did not have funds invested in Icesave, but rather in Landsbanki’s Heritable Bank. Icesave depositors were largely individuals and not so-called wholesale depositors, which is what most charities and local authorities were. Wholesale depositors are not covered by the depositors’ insurance fund, and so are not reimbursed from that fund. I think they have to make claims in the bank’s estate like regular creditors [lenders] and are not likely to recover their money, as their claims are not preferential claims.
Also, Heritable was a subsidiary of Landsbanki, not a branch like Icesave was. Subsidiaries operate like any other business in the local country so in this case the Heritable losses would have been covered by the British deposit insurance fund. [As we all know, possibly the biggest f*ckup in this matter was that Icesave was not moved into a British subsidiary, as British authorities pressed for through all of 2008, right up to the collapse.]
This is my understanding, but like I said, I’m not an expert. Anyone else have more accurate info?
{ 40 comments… read them below or add one }
“so in this case the Heritable losses would have been covered by the British deposit insurance fund”
Unlikely. The British fund covers only retail accounts.
My previous comment was wrong as Heritable obviously had some retail customers. Doh – feel free to delete it!
Don’t really have enough specialist knowledge to help, but I’ve had a look at that ‘Liberal/Left of Centre’ web site. Oh dear. If that is the level of debate that thrives there, then they can keep it
Bradstreet – yup, you need nerves of steel to click on those sorts of links. I decided not to.
This is a good post I join the totally confused brigade about the total sums involved for Icelanders is it 20,000,000 krona per head, or 12,000 euros or just a storm in a teacup over 3000 euros spread over 10 yrs whatever, and why did not Gordon Brown lend The Isle of Man the money to reimburse the Kaupthing savers so then he could breathe hot and heavy on Manxian citizens to pay up for the lot like he does with Iceland, as those guys appeared to have got zero so far.Then there is the legal bit about if sovereign governments are technically responsible for said fund,and did that internet money actually leave London at all( Just used the cash to buy Toy stores,Football teams etc) where are the servers for Icesave.And finally on to data farms how come one of the bad buys owns 40% of that action whilst Alda family of 3 is say 36,000 euros in hock.Sounds suspicious like them that rules in Iceland are fixing a scheme for Iceland’s taxpayers to foot the bill and the elites carry on largely financially intact with hopefully the IP back in power and the “Octopus” back where it belongs, cracks papered over,stuff swept under said carpet(stuff being a lot of taxes for lumpenproletariat who so far have banged pots and pans) Remember comrades Keep the Red Flag flying there.
According to Icelandic professor of economics Thórolfur Matthiasson, Holland and UK claim a maximum of 20,887 euros per depositor.
Here is some information about the Icelandic deposit insurance scheme:
http://www.tryggingarsjodur.is/QA
Regarding Christie
They lost their savings when KS&F collapsed.
The money was lost when the bank Kaupthing Singer and Friedlander (KSF) collapsed last year. (BBC).
If memory serves me right, Gordon Brown (wrongly) stated, when asked about the matter, “the fact is we are not the regulatory authority” (PM Questions 06.05 2009).
The statement made quite a few Icelanders mad at the time. Hence, if Brown tries to send the bill for Christie to Iceland, be it £6.5 or £18k, they might not be happy about it.
But….then again – if you don’t try, you don’t get
>Wholesale depositors are not covered by the depositors’ insurance fund, and so are not reimbursed from that fund
Actually AFAIK, although this is correct for the UK FSCS, the Iceland TIF guarantee applies to all depositors, retail & wholesale.
Although if you have £10m with a bank, a £17k guarantee wouldn’t really matter to you
. And, assuming the coucils etc. banked with Kaupthing in the UK and Heritable, it doesn’t apply.
> I think they have to make claims in the bank’s estate like regular creditors [lenders] and are not likely to recover their money, as their claims are not preferential claims.
I think that they might be preferential creditors, as the Icelandic emergeny law prioritises depositors, not just retail depositors.
In fact, I think that’s been the recent problem with Glitnir. They’re not treating the councils as preferential, I believe (but don’t really understand) because of the route that the money took to reach Glitnir.
I am intrigued with the names some ‘readers’ give themselves, such as ‘strategist’! I actually think that all ‘contributors’ should sign by their real name. When people start to use unidentifiable pseudonyms they can be as wild, inaccurate and downright nasty as they want to be (not that ‘strategist’ comes into that category, but his quoted website does). I’m not a big advocate of FaceBook but at least everyone identifies themselves, and I think that results in comments made being far kinder and more rational. However, I realise that my argument will get nowhere!
sylvia from viking wirral
Alda, click on the ‘About’ button on their page.
A liberal left website.
I’m afraid that tells you all you need to know.
The left will always look to blame other people and expect taxpayers (their own or other countries) to bale them out of their own mistakes.
People who put money into Icelandic banks from 2007 onward were chasing yield, they took the risk.
Of course for many of these people, accepting the responsibility is another thing.
In the UK we’ve got Gordon Brown, he’s printing money. In effect: taking money from savers and our pensioners and giving it to the profligate.
Losses should never be socialised, those who took the risk should simply shutup and take it.
Michael – I have no intention of looking at their website. I’ve already read all I need to know about it.
Which might somehow answer the question, you raised a couple of posts ago – “Whatever happened to Alexandra”.
I guess, this person may have found such a cosy-corner on the net and joined like-minded pals, spending the days with Icelander-bashing.
I would expect that all Icelanders are now going to head for the books and pore over all available documents to learn more about the intricacies of the Icesave bill and its implications, in order to prepare for the referendum and cast their vote responsibly. You might refer the question above to your local Icesave study group.
Seems this statement needs a small revision:
“People who put money into Icelandic banks from 2007 onward were chasing yield, they took the risk. Of course for many of these people, accepting the responsibility is another thing.”
If those depositors were located in Iceland, they were backed 100% by the government when they were nationalized.
If those depositors were located in England or Holland…
The discriminatory nature of the backing after nationalization of the banks doesn´t seem to get much acknowledgement. Perhaps if it had been made clear to people that their deposits to Landsbanki would contribute towards keeping Icelandic depositors whole, at their own risk, that might have been useful disclosure. It´s hard to push responsibility off on others when the terms of the game are deliberately not made clear.
The IP screwed up by nationalizing the banks. If they had let them all fall and incur losses to all depositors equally, we wouldn´t be having this discussion. Painful but more equitable.
Richard : “The discriminatory nature of the backing after nationalization of the banks doesn´t seem to get much acknowledgement”
a) You shouldn’t really care what protection a foreign state may offer its people.
b) People who take risks should expect other people to bail them out.
Regardless of local support, expecting other people to bail out poor investment decisions is simply wrong.
You will have to admit that a lot of folks bought the Ranger Rovers, Toyota Land Cruisers and BMWs in order to join the in crowd. Unfortunately they bet on the wrong dog and will now suffer the consequences! Got my fingers crossed that this will happen! May the reds be victorious!
I am not in favor of bailing out banks, what is rotten should simply be allowed to crumble and fall, in my opinion. However, even if government decides to bail out local banks in attempt to rescue the local economy, I still don´t see an equality issue for bailing out banks in foreign territory as well. The local authorities in that area are really the ones responsible for surveiling the bank’s operation in their area and thus the only ones to take the responsible question of bailing out or not, and the ones to live up to the consequences too.
I simply cannot see how an Icelandic person can be made responsible for what happens between a depositor and a private bank in a country ruled by others. I don´t mind however to pay a compensation for how terribly the so called ‘Icelandic banks’, which is actually a term I think is wrong, because those banks were not only owned by Icelandic people, they were owned by group of people, some Icelandic, others not. I think a compensation is fair, because the lack of surveillance of banks in Iceland was unforgiving, and this was what partly made it possible for them to operate in such vigorous manner in foreign territory. Defective EU legislation also played big part there. Lack of local surveillance also did.
However, such compensation, should nowhere turn the Icelandic population down to it´s knees in hunger and despair. In fact, I consider the actions of the UK and Netherland’s governments nothing short than severe warfare against the Icelandic population and I am quite surprised how this seems to have escaped the general discussions about the issue. How can you otherwise explain the severe oppression of bringing Iceland down to it´s knees with forcing onto us obligations that we very obviously cannot live up to, while also making sure that we cannot follow our legal rights on the issue, and explicitly making sure that if we don´t live up to our obligations, UK and the Netherlands will be able to overtake our precious national resources.
It’s warfare, what else can it be…
>The local authorities in that area are really the ones responsible for surveiling the bank’s operation in their area and thus the only ones to take the responsible question of bailing out or not, and the ones to live up to the consequences too.
Incorrect, which explains, “I simply cannot see how an Icelandic person can be made responsible for what happens between a depositor and a private bank in a country ruled by others.”
Icelandic regulators were the ones charged with regulating Landsbanki. Icesave was just a branch. It actually took me a couple of months to realise the full implications of that. There’s no difference between Jon Jonsson with his Landsbanki account and John Johnson with his Icesave account. Sure, the rates & terms may be different, but they bank at the same bank.
As for the warfare stuff, of course it is. See Clausewitz and then reverse what he said; it still works. That, I’m afraid, is the nature of the sovereign state system. How many Icelanders considered what would be best for the world (or at least Europe) when they decided to stay out of the EU? None. They considered what was best for their state and, probably correctly (well, excluding the financial crisis) determined that the EU wasn’t going to be a net benefit for them.
Thanks very much Alda for posting this and for the help of contributors here. I’ll go with the word of Professor Thorolfur Matthiasson that the British are only claiming from Iceland for the first Euro 21k in each Icesave account, unless anyone else has better information (thanks, Sebastian).
Just to give you a bit of background to my query, I am pretty sure that the British Government has repaid every penny of every deposit held by British people & organisations in all Icelandic banks. The compensation appears to have been organised as follows:
a) first £18k (=Euro21k): paid by Her Majesty’s Treasury (and subsequently claimed back from the Icelandic Govt)
b) sums between £18k & £50k: paid by Financial Services Compensation Scheme (a fund paid for by all British banks)
c) sums above £50k: paid by HM Treasury.
The numbers quoted were that the cost of (b) was £1.4bn, and the cost of (a) + (c) was £800m. This makes the total cost of bailing out all Icesave depositors *in full* £2.2bn, which seemed very close to the £2.2bn that the British Govt loaned the Icelandic Govt and was asking for repayment on. It was the similarity of those two figures that made me wonder if Britain was trying to reclaim the entire cost of the bailout from Iceland rather than merely the cost of the first Euro21k/£18k in each account. If this was true, I felt this unfair on Iceland, and would have strongly justified Icelandic resistance to paying the money back.
The figure of £800m for the cost of covering both the balances below £18k and above £50k sent a little alarm bell ringing with me – my worry was that the British Govt was hiding the cost of bailing out big City of London casino gamblers (fund managers with balances well above £50k – possibly millions in cash) in the cost of bailing out ordinary savers who were tempted by the Icesave hype and interest rate.
This bothered me not just because of Iceland, but because of my more general concern that the British Government has been “captured” by the City of London finance sector, and so has taken a lot of outrageous decisions to bail out City casino gamblers in full, sending the bill to the ordinary British taxpayers (aka “privatising the profits, socialising the losses” aka “moral hazard”).
However, I’d be delighted to accept that the two sums both being £2.2bn approx is just a coincidence, and that the £2.2bn loan includes money for other things in addition to the cost of the Icesave first £18k compensation package.
Which means that the British Government may not be behaving entirely unreasonably (for once) in asking for the £2.2bn back in some way some time. However the precise repayment terms are another matter.
Let’s let Icelanders have the debate as to whether the deal is reasonable and their vote on it. I don’t know enough to comment, except to say that I as a Brit have no desire whatsoever to keep ordinary Icelanders in debt peonage for the next decade or two, and I hope both countries can help each other as much as possible. We both need to get back on our feet economically, with a much more sensible economic balance this time. [Off topic, but I do hope Britain will be able to buy clean, green, geothermal-generated electricity off Iceland one day hopefully soon (perhaps you could give us a year or two's worth free??)]
Finally. Posting as “Strategist” is not intended to be great hubris, it’s an accident of history. I make no claims to be any great strategist but that was the name I used when moderating an election website called London Strategic Voter in 2006 and 2008 (www.strategicvoter.org.uk), and I just kept on using it. I post anonymously for personal reasons, but I don’t abuse that to ‘troll’.
Richard.
The problem is that IceSave (at least British “branch”) didn’t except deposits from Icelanders! Only from residents of UK! So Icelanders were not equal with IceSave depositors in the first place.
This means that you claim for “fair play” is not applicable in this case…
Anybody feel up to a good English translation of the actual question to be put to voters in the referendum, if it takes place? It has been described as unreadable, biased and complicated:
Eiga lög nr. 1/2010, um breytingu á lögum nr. 96/2009, um heimild til handa fjármálaráðherra, fyrir hönd ríkissjóðs, til að ábyrgjast lán Tryggingarsjóðs innstæðueigenda og fjárfesta frá breska og hollenska ríkinu til að standa straum af greiðslum til innstæðueigenda hjá Landsbanka Íslands hf., sem Alþingi samþykkti en forseti synjaði staðfestingar, að halda gildi?
Svarmöguleikarnir eru Já, þau eiga að taka gildi eða Nei, þau eiga að falla úr gildi.
Thanks!
How are Icelanders getting their background information to prepare for the vote?
Newspapers? Blogs? Self-organized community meetings with lawyers and economists invited to answer questions from the people? Word of mouth? Television?
Is it easier for Icelanders to get good information than it is for foreigners?
“The problem is that IceSave (at least British “branch”) didn’t except deposits from Icelanders!”
Icesave was just a brand of Landsbanki, an internet bank operating under Icelandic laws. And even the advertising said so: “Icesave, a part of Landsbanki”. So, this makes no difference at all. The truth still is, Landsbanki went bankrupt, the government nationalized it, and then let Icelanders withdraw all their savings, while at the same time freezing the accounts of all customers of Landsbanki branch Icesave! That’s highly discriminatory, and illegal under EU laws that Iceland agreed to.
Um … actually it was British authorities that froze the Icesave accounts.
Alda, would you pls explain your answer to Michael’s statment (“A liberal left website. I’m afraid that tells you all you need to know.”): “I have no intention of looking at their website”
Well, you have been stomping for the left wing opposition to the Haarde government. But here, you refuse to even look at an allegedly “liberal left website”. Excuse me pls, but isn’t this somewhat hypocritical?
And then, isn’t it quite hypocritical, too, to be so stubbornly against the agreement your own government negotiated with the UK and NL, when you admit you have only a vague understanding of the issues? Hmm.
“actually it was British authorities that froze the Icesave accounts.”
No. Look that up. on October 6, FME took over control of Icelands banks, and on October 7 guaranteed the deposits of the Iclandic branches, while at the same time freezing withdrawal from Icesave (0foreign) accounts. While Icelands could still get their money back (in small amounts at a time) no Icesave customer has been able to withdraw anything after this date! And the Brits thn reacted to this discriminatory measure by freezing Icesave ASSETS (did you confuse this?) on October 8.
We did discuss this at length at Icesave news whn this happened, and it’s in Wikipedia now, too:
http://en.wikipedia.org/wiki/2008%E2%80%932009_Icelandic_financial_crisis
See, knowing the timetable of the chain of events is essential for understanding why foreigners are so p***ed about Iceland. I know the issue is very complicated, especially all those EU rules, and the difficult guarantee issue, but if you take up such a determined position against the compromise your government negotiated, you really should try keep track of the main arguments!
Several people have remarked on the types of comments on the website in response to the issue at hand. I have no desire to read through them. That’s what I meant by my remark.
I may have misunderstood Michael’s inference in this instance — I don’t know. Trying to avoid getting caught up in the endless detours I am presented with. I get requests constantly from people who would like me to look at one site or another and comment on what I find there. I just don’t have the time.
As for your last remark, I have stated my position on Icesave on at least two occasions over the past week or so. Sorry you missed it.
“I have stated my position on Icesave on at least two occasions over the past week or so. Sorry you missed it.”
No, I read the stuff here recently, but maybe I am confused about your position. Looking at the stories again, I see that you neither really supported nor opposed the referendum. Is that correct? However, your “Alexandra” story looks to me like you’re picking on those who were for the deal (btw, I think its bad style to expose commenters on the front page, without giving them the chance to answer in the same way). But maybe this is just a misinterpretation. If I mistook your position, I’m sorry.
As for “it was British authorities that froze the Icesave accounts”, it looks like you don’t want to publish my somewhat lengthy answer. Ok. But pls note, the Icelandic FME froze the Icesave ACCOUNTS on October 7, and the Brits retaliated by freezing Landsbanki ASSETS on October8. That’s a proven fact!
@Strategist:
I think you should add another option. The British loan to Iceland is probably larger than necessary. Since the precise amount needed probably wasn’t available at the time the loan was created, the loan also includes a buffer.
Norwegian depositors where in a similar situation back in 2008 except it was Kaupthing instead of Landsbanki. Norwegian authorities paid the first 20,887 Euros to each depositor by creating a 400 million NOK loan guarantee to the Icelandic deposit insurance fund. Although I’ve never read how much was actually needed to cover the first 20,887 Euros, I would estimate the sum to be somewhere between 100 and 150 million NOK. A large loan prevented problems with the payout. The 400 million NOK loan was later covered by the remaining assets of Kaupthing Norway. Actually, all deposits were eventually covered by liquidating the assets of the Norwegian branch of Kaupthing, so no depositors lost money.
Kaupthing lost many customers in Norway shortly before the collapse. This may be another reason why the loan guarantee was much larger than necessary. 1st of July 2008 Kaupthing had 20 billion NOK in deposits in Norway. When they went down, only 1 billion NOK in deposits was left.
As for “it was British authorities that froze the Icesave accounts”, it looks like you don’t want to publish my somewhat lengthy answer.
Wow. Did it occur to you that I might have left the house for a couple of hours? I do have other things to do, you know, than approve your comments. In fact – you know what? I think you’ve had your say on this blog. Please go play elsewhere.
@Strategist (again):
Here is a “working paper” about the Banking Crisis prepared by the House of Commons in the UK:
http://www.parliament.uk/documents/upload/BankingCrisisMemos250209.doc
Quote, p. 146:
“A total of £3.7bn has so far been paid in compensation for this [the Icesave] default.”
So £2.2bn does not cover every deposits. However, if you subtract the assets of Landsbanki London, I would be very suprised if £2.2bn isn’t enough.
But this is only my understanding of the facts by reading news articles and documents online.
Has anyone, anywhere, published an explanation of what happens to money recovered from the assets of the dead banks? Does it go to the receivers in Iceland, to the UK government, or elsewhere? If the people who seized the assets recover some money from them, will that reduce Iceland’s debt?
It sounds like the banks invested in some real things with real value which could partially satisfy depositors’s claims.
From Strategist, followed by numbers backing it up:
“I am pretty sure that the British Government has repaid every penny of every deposit held by British people & organisations in all Icelandic banks”.
That makes it harder to understand the venom directed at Iceland by some people in the UK.
So the charities who made headlines talking about how their operations would be crippled by their losses have since been made whole?
Alda, I understand that the time this blog takes up is already a problem, but what would you think of collaring some local expert(s) to answer selected questions from your readers? Or has somebody else already done that? If not, I think there’s a real need, whether you do it or someone else with more time does it.
Corresponding with an Icelandic friend has reminded me that my intellectual curiosity overlooks the amount of pain Icelanders are feeling, on multiple levels. I should try to be empathetic, though I’m an unfeeling nerd by habit. So let me say Damn, this is an ugly situation, I can’t imagine what it’s like, and you deserve better.
Regarding the value of the remaining assets of Landsbanki:
“… an estimated ISK 1,100 billion can be obtained for its assets to pay claims against the bank. Assuming that deposit claims in the UK and the Netherlands, are preferential claims, this would mean that around 83% of preferential claims will be covered, based on the position as of 30 April this year.”
Source:
http://www.lbi.is/newsandevents/?NewsID=54
More details:
http://www.lbi.is/Uploads/document/CurrentSituationofLandsbanki%C3%8Dslands.pdf
Thank you for your work, Sebastian. The submission to the British Parliament is certainly the most authoritative source I have yet seen. This certainly trumps any numbers I have previously cited (from The Times (of London)).
And thanks for the later sources. Before you do too much more work, it’s time for me to confess and say that I just cannot bring my mind round to understanding all these numbers. I now know why I didn’t go to work as a banker (more fool me – I could have had a grand life, stealing everyone else’s money with impunity). I think I have enough information now to understand the principles, and that is enough for me at the moment. Thanks again.
Meanwhile on Fred from the Forums’ question as to “why the venom”? My source that no Icesave depositor from UK lost money on Icesave is from here: http://www.hm-treasury.gov.uk/press_101_08.htm “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.”
That means that at the moment, it is the British taxpayers who didn’t have money in Icesave who at the moment are the ones holding the baby for all the losses. But I don’t think the venom against Iceland is coming from the ordinary taxpayers as such. This venom doesn’t exist on the London street – virtually nobody understands what has happened (and for the few that do, I think fewer hate Iceland for it). I think the venom really only exists in the weird world of the internet, where venom is easy.
Maybe the venom is just the shock of those people who could have lost all their money, realising what risks they had exposed themselves to, what could have happened, how stupid they had been. I don’t know. One thing I can guarantee – few of them will ever express the slightest gratitude to the British taxpayer for bailing them out, or to the Icelandic taxpayer going forward.
In an article published today, different figures about the payments from the FSCS are available. These seem to be somewhat higher.
The £2.3 billion mentioned in this article would still fit to Icesave loan mentioned in the initial posting.
Payments by FSCS
paid so far: £4.3 billion
to be paid: £170 million
£2.3 billion to bail out almost 290,000 Icesave customers
£1.1 billion to cover the difference between UK and Icelandic compensation limits
£500 million to cover the cost of extending compensation to 100% for Icesave deposits
source: http://www.citywire.co.uk/adviser/-/news/regulation-training-and-competence/content.aspx?ID=375896&Page=1
This article in City Wire by Iain Martin reopens my original question about whether Britain is seeking money from Iceland for more than just the first Euro21k, saying:
“The UK government is demanding Iceland pay back a £2.3 billion loan used to bail out almost 290,000 Icesave customers. The Treasury is also pushing for a further £1.1 billion to cover the difference between UK and Icelandic compensation limits, the former being £50,000 and the later €20,000. Controversially, the UK government also wants Iceland to pay £500 million to cover the cost of extending the Financial Services Compensation Scheme (FSCS) to 100% for Icesave deposits – a decision taken by the Treasury in October 2008. The Treasury expects to recoup the £500 million it paid out in excess of the £50,000 compensation limit from the sale of Landsbanki, Icesave’s parent company’s UK assets. ‘The £500 million for the top up of the FSCS we will take from the wind up of Landsbanki,’ said a Treasury spokesman.”
However, in the comments section, this accuracy of the article is immediately questioned by someone called Pez:
“It is some mistunderstanding in the article. The UK Government does not want Iceland to pay more than 20.000 euro. However, it is expected that the wind-up of Landsbanki will cover about 90% of the debts. And the assets will go equally to the first 20.000 euros (Icelands part), the UK compensation (up to £50,000) and the £500 million it paid out in excess of the £50,000. Now, the interesting part in the article is that the Treasury expects to recover 100% from the wind-up of Landsbanki.”
I suppose all this goes to show that there remains a lot of confusion about this in Britain.
And not just in Britain!
@Strategist & alda
But look at the original draft of the loan agreement between GB and Iceland dated June 5, 2009 . There it reads in 2.1.1 that
“the Lender makes available to the Guarantee Fund a Sterling term loan facility in a maximum principal of £2,350,000,000, (…)”
On the one hand this figure is in accordance with the figure provided in the article in City Wire and on the other hand it reads in 2.1.2 that
“Disbursements made under the Facility shall be applied (…) by the Guarantee Fund or on its behalf towards one or more of the following purposes:
(a) the repayment (whether by way of set off or otherwise) of any amounts borrowed by the FSCS from HMT which have been applied by the FSCS (on behalf of the Guarantee Fund) in order to pay compensation in respect of claims of Landsbanki London Depositors under Act No. 98/1999 for up to £16,872.99 per claim, together with interest accrued on such amounts borrowed from (and including) 1 January 2009;
(b) the settlement by the FSCS (on behalf of the Guarantee Fund) of the claims of Landsbanki London Depositors under Act No. 98/1999 for up to £16,872.99 per depositor (or, where applicable, per joint-account holder); and
(c) payment to the FSCS by way of compensation and funding for certain costs”
If there is no hidden footnote somewhere else in the document allowing further exceptions with regard to the amount or the purpose of disbursement, only the first 20887 Euros per depositor are claimed from the FSCS.
Thanks Eks. I had no idea this document was on the internet.
Two possibilities:
a) City Wire is accurately reporting a late bid by the British Government to ask for more money over & above the original loan (“pushing for a further £1.1bn…”).
b) City Wire has it wrong.
Two rules in life: (1) always be very careful & read between the lines when using British Government information (2) Be very very careful trusting Fleet Street’s accuracy.
Too close to call!
Second thoughts….the commenter Pez probably has it right
The British Government, as well as asking for the £2.3bn loan to be repaid with interest by the Icelandic Government, also intends to reimburse the sums expended on compensating deposits over Euro 21k from the confiscated assets of Landsbanki. (As Landsbanki now belongs to the Icelandic Government, these assets, when unfrozen, are theirs.) So this could be reported kind of accurately as “asking for another £xxx bn from Iceland” .
As Pez states, it is interesting that the British Treasury now expects that Landsbanki’s assets will cover 100% of the bail out – this suggests that some of Landsbanki’s loans are not a write off and this squares with reports that the financial bubble is starting to reflate. Maybe the remaining assets (minus the deductions) upon being returned to Iceland will be worth something?
(NB I am in far deeper than my expertise here, just trying to look on the bright side.)