Iceland bank failure may cost UK Treasury $1.3 bn

Posted 06/11/2008 - 16:13 by steveejeb

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2008-11-06 (All day)

The British government has set aside 800 million pounds ($1.3 billion) for British savers who lost their money when Icelandic-owned Internet bank Icesave collapsed last month, the Treasury announced Thursday.
The approximately 230,000 British depositors whose money vanished when Icesave's parent bank, Landsbanki, went into receivership in October will receive compensation to replace all of their lost savings, Treasury chief Alistair Darling said in a statement.
He also reiterated a pledge he made last month that "no depositor in Icesave" would lose any money as a result of the bank's collapse.
Normally, the government only guarantees up to 50,000 pounds ($80,000) of savings, but it has made an exception in this case to reimburse British savers for the full amount of their losses.
The government is expected to begin paying compensation to savers next week, and it hopes to pay the majority of claims this month.
The Treasury is in discussions with Iceland to recover some of the money, claiming that the first 20,887 euros ($26,791) of each British saver's deposits should be covered by the Icelandic government.