BRITISH BANKS TO COMPENSATE UK SAVERS OF KAUPTHING

  • BobWashington
  • 10/10/08 31/05/09
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Posted: Mon, 02/09/2013 - 13:13

Anyone seen this news item - out today across a wide range of newspapers? No mention of the IOM but looks promising.

The British banks, building societies and credit unions have paid the first of three installments of £363m to compensate UK savers of Icelandic banks who lost money during the banking crisis in 2008.

The British Bankers’ Association said the UK financial institutions will pay a total of £1.08bn over the next three years to the Financial Services Compensation Scheme (FSCS).

The compensation paid by the banks will finance the shortfall created due to the inability of the three Icelandic banks, Icesave, Heritable Bank, and Kaupthing Singer & Friedlander, to pay to the FSCS.

During the peak of the banking crisis in 2008, the UK Government decided to bail out 230,000 UK savers by paying them their deposits totaling to nearly £3.5bn.

The amount was paid by the Treasury as the FSCS did not have enough funds to finance the bail out.

FSCS was to recover the compensation from the Icelandic banks and repay the UK Government. Now, however, the payments made by the banks will be used for the purpose. The Icelandic banks are expected to pay £500m after April 2016.

Anthony Browne, CEO of BBA, said: “The UK’s banks are paying £1bn to compensate for UK savers who could have lost everything when the Icelandic banking crisis hit. 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 that if there is ever another bank failure that their savings will be protected.”

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Nothing promising for us

  • anrigaut
  • 19/10/08 30/10/09
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  • Mon, 02/09/2013 - 17:17

I hate to disappoint you, but I see nothing remotely promising in this for us.

Depositors in the Icelandic banks in the UK, including KSFUK, have already been fully compensated by the FSCS. To do this, the FSCS borrowed money from the Treasury, money which needs to be repaid. What is now happening - as explained in the article - is that the (other) British banks have now agreed to pay levies to the FSCS to make up most of the shortfall between what was paid out to depositors and what has been - or will be - recovered from the winding up of the Icelandic banks. No more, no less.

It is of course good news for British taxpayers as a whole. But it has nothing to do with KSFIOM.

Update: It would appear that the headline to this thread was inspired by that in the DT, which reads:
"UK banks pay £1bn to rescue Iceland savers
Britain's banks have been forced to pay more than £1bn to savers who lost money in failed Icelandic banks at the height of the financial crisis."
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10279612...

A case of typical shoddy and inaccurate DT reporting. The (UK) savers were 'rescued' long ago by the FSCS & Treasury. The banks are NOT paying money to savers but to the FSCS.

For a more accurate report, see for example: http://www.cityam.com/article/1378088467/uk-lenders-pay-1bn-iceland-bank...


Nothing Promising For Us.

  • BobWashington
  • 10/10/08 31/05/09
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  • Tue, 03/09/2013 - 13:12

Many thanks for taking the time to clarify this issue. Your posts are always very useful. I admire your doggedness in keeping us all informed on the truth behind the headlines and in tracking progress in recovering our money.. Also appreciate the link towards the more accurate report. Disappointing though it is.


Nothing Promising For Us.

  • VikingRaider
  • 10/10/08 31/05/09
  • unspecified
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  • Fri, 04/10/2013 - 18:59

If the UK has secured return of funds from Iceland, it certainly gives Douglas a club to wield at Westminster as HMG is required to represent IoM interests abroad. As a sidebar, I was reading the House of Commons Foreign Affairs Committee (FAC) Overseas Territories subcommittee evidence on the Turks and Caicos Islands, where 'responsible' self-government was suspended in 2009 amid a swathe of dodgy deals, a chamber of financial horrors that makes the IoM look like Captain Mainwaring. The FAC was left with no delusions over the importance of offhore banking to UK capital markets, (the sums are absolutely enormous) although the Crown Dependencies appear to be unique in that UK domestic banks need not operate branches therein as a separate subsidiary and transactions may be made within the UK clearing system. It would be interesting to learn of the extent of links between HM Treasury or the BoE with Crown Dependencies, although the FAC went in camera for those reports.


Cloud cuckoo land?

  • anrigaut
  • 19/10/08 30/10/09
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  • Sat, 05/10/2013 - 09:41

What club would that be, Viking Raider?

I think you misunderstand. The only funds 'the UK' has secured from Iceland relate to Icesave (Landsbanki) which - unlike the UK & IOM subsidiaries of the other Icelandic banks - was supposedly regulated by the Icelandic regulator and not the UK or IOM regulators. When it became clear that Icesave depositors were not going to get any compensation from Iceland, the UK stepped into the breach and essentially upfronted the money (20k euros per depositor) that should have been paid by the Icelandic compensation scheme (the fact that the UK went further and paid out over & above the compensation limit is another, unrelated, issue). This - the £20k per depositor - is the money the UK (and the Dutch) authorities have fought to get back from Iceland, and of which they have now received something over half (having obtained priority status) from the Landsbanki estate. Payments were made possible by granting Landsbanki (now nationalised) exemption from the capital controls currently in place. Incidentally, this granting of prioirty status means that other Landsbanki creditors (including Landsbanki Guernsey) will get practically nothing.

The UK has received no special treatment from Iceland in respect of either KSF-UK or Heritable (the UK Glitnir subsidiary). Indeed, the FSCS has no direct claim in Iceland relating to Kaupthing or Glitnir. The only claims are those by the respective UK banks for funds that had been upstreamed to the Icelandic parent. So, as we know, KSF-UK has a (partially agreed and unsecured) claim in the winding-up of Kaupthing hf, of which we are due a small share via KSFIOM's claim against KSFUK (and the FSCS, as the largest creditor of KSFUK, will be due a much larger share). However, neither the Kaupthing nor the Glitnir winding-up committees can make any distributions until capital controls are lifted - which is currently the subject of much frustration amont the creditors (see recent News items and also the latest blog by Sigrun: http://uti.is/2013/10/iceland-capital-controls-government-action-and-pos...)

At least that's how I understand it. I hope I've got it basically right. But please anyone correct me if you think I haven't.


iom has most of its money back too

  • expatvictim
  • 10/10/08 01/11/10
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  • Sat, 05/10/2013 - 05:05

As I understand things, IOM has 95.8% of the money it paid to fund the DCS already - the same as us. Also, I expect the IOM will get all or the majority of any loss back from the other iom based banks . I cant see UK going to bat for the IOM under these circumstances.
Even if they did any money would go to the IOM and not us; the UK would not be
representing the JLs.


@expatvictim - more than that

  • anrigaut
  • 19/10/08 30/10/09
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  • Sat, 05/10/2013 - 09:55

In fact, surely the DCS will have recovered from the liquidation rather more than 95.8% of the money it paid out? While that figure applies to money paid to the under £50k depositors, the DCS will by now have recovered 100% of what they paid out to around 1500 depositors with more than £52k. Plus, as you say, presumably money from the bank levy.


Outstanding Payout for the Minnows?

  • VikingRaider
  • 10/10/08 31/05/09
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  • Wed, 09/10/2013 - 00:32

You lot have developed abundant expertise on the all this which is always worth a look. However, it would be interesting to see what happens if they reach 100 percent payout as I was informed that the few hundred pounds not returned under the DCS would be paid when this figure was achieved. Nonetheless, the JL seem utterly disiterested in the minnows, even though the outstanding sum could make a big difference.


Re "the Minnows"

  • anrigaut
  • 19/10/08 30/10/09
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  • Wed, 09/10/2013 - 09:34

Hi again VikingRaider,

I'm not too sure what you mean by the 'few hundred pounds not returned under the DCS'?

If (as I suspect) you are referring to the interest uncapitalised at 8 Oct 2008 which was capped at 5%, then that of course applied to all creditors, not only those who claimed under the DCS. Mike Simpson has stated quite clearly in his note last January that, in the event of recovery exceeding 100%, those (many) who were affected by this capping will be first in line (step 1): "Creditors who were entitled to contractual interest in excess of 5% per annum would receive the amount due in excess of 5% per annum up to 8 October 2008 (Bankruptcy Code Sec 23(3)). " If you missed this update, the link is here:
http://www.kaupthingsingers.co.im/2013/january/18january2013/

This will apply equally to all those affected by the interest cap, regardless of the amount of their deposit and whether they claimed directly in the liquidation or under the DCS . So I fail to see why you feel the JLs are 'utterly disinterested in the minnows'.

If recovery exceeds 100.4% (at which point all creditors will have received their full interest entitlements up to 8 Oct 2008 ), then further interest at 4% pa will become due (Step 3). That also will apply (at least up to the date of the first payments) equally to all creditors. There are a number of unresolved issues relating to this step, but - in order not to incur unnecessary expense - they will not be addressed further unless and until it becomes clear that 100% will indeed be reached.

The uncertainty specific to DCS claimants relates not to their entitlement but to the mechanism for distributing any such monies (directly to the individual depositors or via the DCS who would then forward it). The latter seems more likely (since our claims were attributed to the DCS) and would also be less costly for the creditors.

I hope that helps. But if you were referring to some other unreturned funds (of which I am unaware), perhaps you could provide more details.


Minnows Jumping

  • VikingRaider
  • 10/10/08 31/05/09
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  • Fri, 11/10/2013 - 06:52

Many thanks Anrigaut. You make it crystal clear. The problem at this end dates back to a mistake by the JL (in 2009 perhaps) when they sent me the bumpf on dividends and then later rescinded the original statement. I sent this on to Kaupthing HF as a claimaint and they sent back a swathe of forms, duly completed, sent to Rekjavik and presumably tossed into the nearest geyser. Still, it would be nice if we are returned our few hundred pounds outsanding before my old dad pops his clogs; he's looking forward to the celebratory fish and chips!


@VikingRaider

  • anrigaut
  • 19/10/08 30/10/09
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  • Fri, 11/10/2013 - 11:57

Hi again VR,

I'm glad it was clear - I do my best! But I must say what you are now saying is far from clear to me! It is of course essential that your claim was eventually recognised and approved by our JLs (not Kaupthing HF in Iceland), either directly or via the DCS. If you have any doubts on that score, please feel free to email me through my contact link (I would have emailed you, but it seems your contact button is not activated). Claims are no longer accepted by the DCS, but can still be lodged with the liquidators.

Anrigaut

Update: Since you have clearly recovered most of your funds (whether through EPS, DCS or directly in the liquidation), your claim must indeed have been approved at some stage by the JLs. But you can still contact me if you think I might be able to help further.