Iceland is ripping us off


9:45 am - January 6th 2010

by John B    


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Just for the avoidance of doubt:

1) The democratically elected Icelandic government, under EU/EFTA financial regulation equivalence rules, agreed long before the crisis even began that it would guarantee compensation of the first EUR20887 of deposit to retail depositors in Icelandic banks from other EU/EFTA countries.

2) The Icelandic banks, with explicit permission from the democratically elected Icelandic government (as part of the economic boom that vastly enriched Icelanders for many years), actively marketed their savings accounts to depositors from other EU/EFTA countries.

3) The Icelandic banks then went bust and lost their depositors’ money.

4) This means that, unequivocally and in every possible sense, the Icelandic government is responsible for paying the first EUR20887 of compensation to retail depositors in Icelandic banks from other EU/EFTA countries. They agreed to take on that debt, and retail depositors in the Icelandic banks made the deposits on the basis that the Icelandic government weren’t a bunch of ropey shysters who’d refuse to pay debt that they owed.

5) For understandable reasons of domestic harmony, the governments of the UK and Netherlands (where the majority of Iceland’s victims were located) agreed to pay the compensation themselves, and subsequently chase the Icelandic government for the money it owed.

6) Today’s populist refusal by Iceland’s president to pay the UK and Netherlands government the US$5bn it owes as a result, despite the extremely generous payment terms they’d been offered, represents every single Icelandic person nicking more than US$10,000 from British and Dutch taxpayers.

If that’s democracy, screw it.

Update: Dsquared in the comments has a good summary of the Iceland situation:

The basic story here is that a small and wildly self-regarding Nordic nation, with a history of electing right-wing governments on the back of get-rich quick schemes, did so. Then that right-wing government proceeded to deal with its creditors in an amazingly stupid and dishonest manner because it wanted to pretend that something close to boom levels of consumption could be sustained. Then it all fell apart and a left-wing government was elected and started trying to clean up the mess. Then the elected President (from the same party as said right-wing government) decided to veto the solution. And this is, in some way, Gordon Brown’s fault.

He’s also written the whole, erm, saga up as a morality play. Well worth a read.

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About the author
John Band is a journalist, editor and market analyst, depending on who's asking and how much they're paying. He's also been a content director at a publishing company and a strategy consultant. He is a regular contributor to Liberal Conspiracy and also blogs at Banditry.
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Reader comments


Absolute rubbish. A bunch of local authority bookkeepers, operating way beyond their incredibly limited expertise and ignoring all advice, put money into Icelandic banks. The Icelandic banks failed and the British government, always desperate to shore up the public sector no matter how incompetent, bailed them out. Now the British government is making out that this is the Icelandic taxpayers’ problem and getting obnoxiously aggressive with a very small country.

This seems to be the myth people want to pursue, like Chris, that it is just a bunch of fat cat investors and councils that screwed the pooch and landed themselves in this mess.

It was also a significant amount of normal people, you and I, that put their savings in a bank covered by the same assurance scheme that every bank operating out of the UK and offering savings services agree to provide, that could have lost out because Iceland and their banks were unable at the time to pay what they were required to under their legal agreements.

It IS an Icelandic taxpayers problem because it is an Icelandic government problem. It is also not just a public sector problem, Chris, and it’s highly insulting for you to claim otherwise.

I say we invade them. A war got us out of the last recession, and it will get us out of this one.

With any luck, the other viking countries will unite behind iceland and make it a prolonged effort.

I think it’s brilliant .. Iceland showing Gordon Brown the finger.

Shouldn’t this article read, “privileged wealthy savers get their just deserts”? I mean, they must be “rich” if they have money to save, for any true socialist has had all his taken away (or provided by) the state.

Why are there so many trolls around at the moment?

Do lefties regularly troll Dale’s Diary, ConHome and the rest? Or do the right whingers have a special penchant for being obnoxious?

1) “First and foremost, European countries need to take a close look at how the deposit guarantee scheme is organised. It was not designed to deal with a systemic crisis but with the collapse of a single bank.”

Wouter Bos, The Dutch Minister of Finance.
Source: http://www.minfin.nl/english/News/Speeches/Wouter_Bos/2009/02/Six_Questions_for_the_Banking_Sector

All the Icelandic banks collapsed.

2) The Icelandic banks, with explicit permission from the democratically elected ——-“Icelandic, British and Dutch”—– government (as part of the economic boom that vastly enriched —-Icelanders, Britts, and the Dutch—— for many years), actively marketed their savings accounts to depositors from other EU countries.

3) It’s not a question of if the Icelanders will pay back but how.

4) This means that, unequivocally and in every possible sense, the Icelandic, British and the Dutch governments are responsible for paying the first EUR20887 of compensation to retail depositors in Icelandic banks from other EU countries.

The British government agreed to pay every single penny back, then forcing the government of Iceland to pick up the bill.

5) For understandable reasons of domestic harmony (lol), the governments of the UK and Netherlands (where the majority of Iceland’s victims were located) agreed to pay the compensation themselves, and subsequently chase the Icelandic government for the money it owed.
—- “It was not designed to deal with a systemic crisis but with the collapse of a single bank.” -Wouter Bos.

6) Populist move not to say yes to every single thing that the UK and the Netherlands say? Please tell me you’re joking.

As it turned out, the UK and Holland blatantly forced Iceland to take on a guarantee of 50% of its GDP. How would the UK react to a forced claim of £700b from the United States or the Netherlands to a claim of €300b from Germany, while being denied the chance to determine the legality of the claim?

Keep in mind, the Icelanders are willing to pay. We just don’t agree on the method.

@1, this has nothing to do with councils – the money being discussed is the first eur21k of individual private savers’ accounts. Individual private savers whom Icesave was marketed as if it were any other online savings account.

@4, we’re talking about savings *up to a maximum* of eur21k = c.gbp15k at the time. Redundancy money. Funeral money. Holiday money for people who decided they’d rather save up and go than put it on their credit cards and pay later.

(you’re also a bit confused on ideology – whilst a theoretically perfect Marxist state wouldn’t feature individual wealth, that doesn’t mean that even the most extreme Marxist in our society is obliged to hand over all their money to the actually-existing capitalist-corporatist state that they oppose…)

John B,

Minor detail:

AFAIK Iceland is not, yet, in the EU, so you shouldn’t really be saying ‘other EU countries’, now, should you?

9. Charles Wheeler

Hmmm… Icelandic bankers borrow billions with no questions asked. The inevitable happens. Then the taxpayer is lined up to bankroll the culprits.

If that’s neoliberalism, screw it.

@6, I don’t think you’re right on the payment terms.

The money owed by the Icelandic government to the UK and NL governments is the sum of the individual EUR21k payments, which the Icelandic government had pledged to guarantee.

The money that the UK government has compensated savers with above the EUR21k limit will be recovered from the Icelandic banks’ remaining assets (with the UK government lining up alongside the banks’ other creditors as they’re wound up). The Icelandic government isn’t liable for, and isn’t being asked to pay, this money.

Finally – Iceland *chose* to take on a guarantee of 50% of its GDP when it allowed its banks to run up government-backed foreign currency liabilities of 50% of its GDP. The UK and NL governments are acting solely to recover the money the Icelandic government had *already assumed legal responsibility for*.

@8, yes, fixed. “yet” is an interesting one – I don’t see the UK and NL governments agreeing to accession if the banking compo isn’t paid.

Paul Sagar @ 5

Do lefties regularly troll Dale’s Diary, ConHome and the rest? Or do the right whingers have a special penchant for being obnoxious?

Last time anyone counted, between a third and a half of Dale’s traffic was from non-Tories.

Pardon me, but I thought political debate was all about the clash and contest of ideas, and seeing things from fresh perspectives.

Maybe you’re right and everyone should just stick to venting in his/her own little echo chamber.

Speaking personally, I have voted Labour in every election since 1997. But after Brown came in, I thought ‘never again’.

In the past few months I have been pretty impressed by Cameron’s pitch as the true progressive. (I still count myself as progressive.)

But before taking the big step of actually voting Tory, I thought I’d just do the rounds of the centre left blogs one more time.

So, thanks. Your attitude just reminded me why I was so disenchanted. I am fully decided now.

You can chalk up one more ex- Labour voter you have pushed fully into the Cameron camp.

@9, you’re getting the order wrong: the taxpayer agreed to bankroll the culprits well before any problems arose.

Had the taxpayer refused to bankroll the culprits in the first place, by saying “no, we’re only a small country, we can’t afford the risk of compensating millions of foreign-currency savers if your bank fails”, then the taxpayer wouldn’t now be in this position.

Instead, the taxpayer said “ooh, an economic boom, yes Mr Banker, you can do whatever you like as long as you funnel lots of lovely money into the treasury so we can pay lower taxes and have better public services, no questions asked”.

I think it’s worth making the point that this bill has not yet been blocked, the President’s refusal to sign has forced a referendum it doesn’t mean that the bill won’t go ahead in the end. I’d have to say that if I was a democratically elected leader who had received a petition signed by 25% of the population I’d have done exactly the same thing, the actions of a government should be accountable to it’s people.

Given the magnitude of the debt (as Petrur notes above) I think it’s fair for the Icelandic people, most of whom had nothing to do with this to ask why they should pay.

14. astateofdenmark

If the US, China or India demanded 750 billion of UK taxpayers I would react the same as the Icelandics.

If a small west African country was being chased for what it legally owed by westerners, despite difficulties affording it, you and the rest of this site would be very unhappy with the injustice of it.

Whoever these savers are, we can be fairly sure that they are all part of that evil class that Sunny was in favour of declaring war on. You know, definitely middle, and mostly upper-middle. And free markets involve individuals taking responsibility for their investment decisions. If people did so rather than expecting bailouts and guarantees, then we wouldn’t be in this mess in the first place: people would have stuck their money in safer places like mutuals.

So it strikes me as a bit strange that this site suggests punishing high earners for generating more income on the one hand with, while defending their right to make really crap investment decisions and get paid off anyway on the other.

Doesn’t Browns decision to freeze Iceland’s assets play a role here? Where was that agreed beforehand? You can get way with being a heavy-handed debt collector when you have the power of the state to back you up (especially since New Labour handed them new powers), but in the state of nature that nations are in, perhaps it is easier to say “fuck you” to them. Caveat emptor.

Also, this decision could benefit Iceland’s citizens in the long run. It will destroy their Government’s credit rating, preventing them from taking on crazy debts on their behalf in the future.

“The money owed by the Icelandic government to the UK and NL governments is the sum of the individual EUR21k payments, which the Icelandic government had pledged to guarantee.

The money that the UK government has compensated savers with above the EUR21k limit will be recovered from the Icelandic banks’ remaining assets (with the UK government lining up alongside the banks’ other creditors as they’re wound up). The Icelandic government isn’t liable for, and isn’t being asked to pay, this money.”

That’s the bit I’m trying to clarify. Haven’t seen that from anyone else but you John. Got a source?

“Do lefties regularly troll Dale’s Diary, ConHome and the rest? Or do the right whingers have a special penchant for being obnoxious?”

As a liberal surely I’m entitled to comment at something called “Liberal Conspiracy”?

@14, if a democratically elected UK government had agreed to guarantee gbp750bn of debt owed to private investors in the US or India, then of course we’d be morally on the hook for it.

The difference with Africa is that 1) Africans didn’t vote for the policy of running up debts for their leaders to steal; Icelanders did vote for the policy of financial services expansion 2) Africans didn’t benefit from the money their leaders borrowed and stole; Icelanders did benefit from the financial services boom 3) Africans are so poor that repaying the money would lead to serious material hardship; Icelanders will still have one of the world’s highest national incomes even after paying this compensation.

Those of you backing the Iceland default: do you think Gordon Brown should tell all holders of UK government debt “actually, we can’t be arsed to pay this back; we’d rather spend the money on fun stuff. Piss off the lot of you”? If not, what’s the difference between the two situations?

Tim – here.

John, from that piece:

“The FSCS will repay any further savings up to the usual threshold of £50,000 at a cost of £1.4 billion, with the Government stepping in to cover any amounts above this threshold. The total cost to the Treasury of compensating the first £18,000 of savings, and any sums above £50,000 is £800 million, but now taxpayers will not have to pay all that bill. ”

From the sums being demanded (two or three billion) it looks like the UK is demanding all of the money, not just that first 21k € which Iceland legally owes.

What Iceland legally owes under the EEA rules is whatever fraction of that £800 million is not the above £50k.

To get to the couple of billion being demanded you’ve got to add in that £1.4 billion the FSCS paid out….and that’s a UK thing, not a legal obligation of the Icelandic Government.

No?

20. astateofdenmark

17

Whether the government is elected is neither here nor there. The level of per capita income is neither here nor there. If you are going to invoke strict liability, then it is just that: strict. If you’re going to invoke moral equivalence, then the it is immoral to freeze the assets *and* demand repayment on top from such a small number of people. Where’s your humanity?

I think what annoys the left here in this case, is that the debts they’ve run up have to be paid by UK taxpayers for years to come. Yet they feel Iceland are ‘getting away with it’ by defaulting.

“if I was a democratically elected leader who had received a petition signed by 25% of the population I’d have done exactly the same thing, the actions of a government should be accountable to it’s people.”

So 25% of the UK says that German children under the age of 10 should be killed. I’m being purposefully facetious, but the terms of such a “democratic” demand by the Icelandic people are the same in principle…25% of one country affecting the reality of another country that they have no say in.

22. astateofdenmark

19

And now reading Tim W’s comment, my suspicions that HMG are simply bullying a little country seem to be confirmed. If the statutory limit is covered by the seized assets, Iceland should tell us where to go.

Tim, the amount being demanded is a combined sum for both the UK and Denmark…am I misreading your argument?

It might be Holland (not Denmark) but this is exactly what I’d love to find out.

Is the UK Govt insisting that Iceland coughs up the legally (by EEA rules) binding 21k€ maximum per account. Or is it trying to get the whole caboodle?

From what John’s pointing me to I suspect the latter. In which case of course Iceland has ever right to tell HMG to go swivel.

If not, of course then they don’t. But I’d love to know.

One aspect which is ignored is why did the FSA not better assess the Icelandic Banks? From what I have read the Icelandic Banks offered considerably higher interest rates. If Brown had kept all financial regulation under the control of the B of E and not created the FSA, then perhaps the inherent risks posed by the Icelandic Banks would have been spotted sooner. It would be interesting to know to know as whether any astute financiers risked their money with the Icelandic Banks. Brown’s intervention over the Icelandic Banks collapse may be in part due to the inadequate financial regulatory system developed by him. Brown’s unwillingness to act over the Equitable between 1997 and 2000 is another example of his lack of understanding of finance.

Sorry, brain fart mixed up Dutch and Denmark, too many D’s 😉

27. Old Labour

Has anybody told Daniel H his fav country is full of scroungers

Tim W – As far as I’m concerned your comments are most welcome, they always come across as thoughtful and relevant. If you want an example of trolling try #11, the man who reinvigorated in his desire not to vote Labour as a result of a mild comment about trolling made by a Liberal Democrat.

John B – TBH I’m in two minds about the whole thing, it’s an awful situation and in the end someones got to pay. It’s just that I’m very uncomfortable with a situation where an awful lot of people, most of whom had nothing to do with the whole affair are suddenly told by the government that they’ll have to repay this massive foreign debt.

Lee – An awful lot of people in Iceland got no say over what happened with this debt until now. The UK will still get a say in the matter because it still has plenty of bargaining power.

29. Old Labour

Well arightstateof denmark and Tim w are saying it is all HMG’s fault then it must be true.
No one could accuse a couple of right wing hobbits (sorry trolls) of telling Porkies or selective posting.
Tim W how much time do you spend on this site.
Talk about a “Magnificent Obsession” with nasty lefties.
Get out boy and meet a wholesome country conservative gal and populate the world with little Tarquins or Terrys who don’t like dark men

@andreas – but the people did have a say. There were socialist and Green parties and candidates throughout the 2000s claiming that the banking boom would harm Iceland and should be stopped; the people instead chose to vote for candidates who pledged to continue the binge. It’s not even like the UK, where there was no credible alternative to voting for the pro-finance parties

31. Old Labour

Bloom
Who cares who you vote for ?
To me the post sounded like a man who believes in emotional blackmail.
You took my toys away Daddy, now I love Mummy.
Immature buffoon.

How refreshing to see the Icelandic President force these legislators to consult the people via referendum. One can only dream of their arrogant counterparts here in the UK bowing to democracy in similar fashion. And the cream on the fisher-folk’s cake is that they may be kept out of the EU if they baulk at this payment – lucky old Icelanders!

Old Labour @ 31

There is no blackmail involved.

Nor throwing of toys out of any pram.

It is more in sadness than anger that I note that visitors are deemed ‘trolls’ for any slight deviation from the prevailing prejudice.

Suppression of dissent, political cynicism and elitist ‘we always know best’ attitudes are a big reason why I and many others are deserting Labour.

But even as I desert, I don’t really want to see my old comrades totally humiliated and wiped out in May.

But the viciousness, polarisation and unpleasantness that you and some others at LC demonstrate towards casual passers-by is just the sort of behaviour that if sustained for another 4 or 5 months will turn a landslide into an avalanche.

You sit here preening yourself about your supposed intellectual and moral superiority imagining that only wicked, selfish or stupid people could think otherwise. And only Trolls could express a contrary – or even mildly divergent – view.

Who cares?

In the great scheme of things, I guess only Bloom’s family and friends care what Bloom says or how he votes. Those who support Labour should care. And the fact they don’t is part of what ex post facto will explain their defeat.

34. Old Labour

“It is more in sadness than anger that I note that visitors are deemed ‘trolls’ for any slight deviation from the prevailing prejudice.

Suppression of dissent, political cynicism and elitist ‘we always know best’ attitudes are a big reason why I and many others are deserting Labour.”

We know best, christ the Indy was in tears because we don’t have a mummy Thatcher who knows best
Are you real when has there been a suppression of the conservative view. You lot control 95% of the papers even the Indy is now Tory. The Guardian has gone all lib dem. You have Channel 4 controlled by Daniel Johnson and Sky and ITN news.
I don’t think you’ve deserted labour because you always voted Tory.
Also about trolls, nobody is asking for them to be banned but people are asking why ?
Unlike you I don’t have much time, having a life, and I will post on sites that interest me.
Why post on a site that you disagree with the sentiments and dislike the posters. I’m sorry but you still sound like pathetic girls blouse or blooms

With any luck, the other viking countries will unite behind iceland and make it a prolonged effort.

ha ha!

36. Old Labour

PS
Who said I would be voting for New Labour.

“Lee – An awful lot of people in Iceland got no say over what happened with this debt until now. The UK will still get a say in the matter because it still has plenty of bargaining power.”

They, by voting for their government to manage their state finances, had the ultimate say. The government bought up the bank, and with it the debt the bank owed to other countries savers through it’s collapse. The UK gets a say in the matter because it has so far paid Iceland’s debt in this matter for the savers of the UK so that Iceland can stabilise easier, and now wants an agreement to have that debt repaid.

It’s amazing to my mind that anyone thinks anything else should happen.

Nick @ 15

You are correct in that the problem here was the UK Government fulfilling a compensation guarantee they had not given- put aside the question about whether it is an appropriate role of government to provide compensation guarantees at all.

Investment decisions are meant to be about the investor balancing risk and return. So if I go to a Hawaian casino and put my life savings on red can I expect compensation from the government if the ball lands in black?

The principle is the same.

And let’s be clear, this isn’t a “foreign debt” it’s ICELAND’S debt. An Icelandic bank, in Iceland nationalised by the government of the people of Iceland.

“Investment decisions are meant to be about the investor balancing risk and return”

And one of the things mitigating the risk was the EU/EFTA financial regulation equivalence rules

Did your casino tell you up front with legal backing that it would pay you at least a portion of your “gamble” even if you lost?

The principle is nowhere near equivalent.

Lee@37 – The UK government lent Iceland the money so that UK savers got their compensation promptly rather than five years down the line when the diplomatic and political implications had been sorted out.

It could considered to be the fault of the Icelandic government for not sufficiently reigning in their banks, but there are plenty of others who share the blame here.

We could blame the savers who foolishly put their money in a bank in a nation with a mere 300,000 people.

We could also blame the UK Financial authorities who failed to notice that this one bank was holding deposits valued at around 25% of it’s host nation’s GDP.

Finally we could blame our old friends the ratings agencies who suggested that Icelandic savings were reasonably safe.

There’s plenty of blame to spread around, but it looks like all the pain’s been given to the Icelandic taxpayer.

…which reflects the fact that the Icelandic taxpayer got most of the upside when things were good. Same for the UK – as a whole we benefited massively from the banking boom, to a far greater extent than the last two years have cost us.

43. Strategist

After a lot of farting around from timewasters in this comments column, the comments since pagar @37 appear to finally be focusing some attention on the key points.

But can somebody answer Tim’s question @19 & 24?
What I would like to know is the following:

1. How much have UK-based private savers been compensated by the British Govt for the deposit they held with collapsed Icelandic banks?

a) the first 21k euro or £18k approx (which appears to be the EFTA deposit guarantee)
b) the first £50k sterling (which was the British domestic deposit guarantee)
c) every last penny
d) some other amount

2) How much did that cost the UK Govt? What fraction of that cost was covered off by the collapsed bank’s UK-based assets? (the ones seized by offically classifying the Central Bank of Iceland alongside Al Qaeda as a terrorist organisation…)

3. What do we know about the number and identity of the UK depositors who had sums over £50k in the Icelandic banks? If the Treasury had out of the kindness of its heart to widows etc unilaterally paid out (say) the first £200k, who would that still have left still exposed to losses?

My suspicion is that is there a lot of casino gamblers who had millions in those banks hiding behind a larger number of small depositors with less than £200k. Those big sharks should have lost their shirts in this debacle. We should be angry with Alistair Darling that he bailed those guys out, not with the Icelandic people.

Lee & John B, you obviously had your money on deposit in these Icelandic banks. Can you get your numbers out on the table? How much did you have on deposit in the banks that crashed? How much did you get back, if anything yet?
(Order of magnitude amounts will do. It’s what your personal experience can tell us about the general situation I’m interested in, not your private personal circumstances.)

44. Strategist

PS It might be that many of the answers I am seeking are in the Times article linked to by JohnB @18?

However this link gives me a 404 error – page not loaded. (Is this my first brush with Murdoch’s pay wall???)

Well that didn’t take long for bone headed nationalism to be employed by neoliberal grifters. No ‘Iceland’ is not ripping us off, banks are, turning this into a nation state ruckus it exactly what the criminals actually responsible want.

Strategist

The commitment made in October 2008 was unambiguous. The Treasury guaranteed 100%.

http://www.hm-treasury.gov.uk/press_101_08.htm

47. david brough

I say we stick to the fucking mutuals in future. The day the Co Op gets bailed out is the day I start cheerleading for capitalism, or for whatever you’d call this alliance between an anti-worker government and corporations.,

“Those of you backing the Iceland default: do you think Gordon Brown should tell all holders of UK government debt “actually, we can’t be arsed to pay this back; we’d rather spend the money on fun stuff. Piss off the lot of you”? If not, what’s the difference between the two situations?”

That wouldn’t actually be a bad idea (in the long long term). The Government would never be able to go into debt again!

Good to see the tory trolls standing up for Britain. (not)

They always let their hatred of any party that governs Britain other than their arrogant selves get in the way of supporting Britain.

The real traitors are Conservatives, always have been.

“I say we stick to the fucking mutuals in future.”

Yes, and we can thank that clown Jonny major for the clusterfuck of the end of mutuals.

Sally @ 50,

Absolutely right.

Lee @ 40

And one of the things mitigating the risk was the EU/EFTA financial regulation equivalence rules

Yes, but ultimately the Iceland investor was risking the possibility of the Icelandic bank, backed by their government, going bust. That’s why they got a better return.

They lost, but were then bailed out by the UK government who repayed them with funds they had appropriated by taxation.

If I invest in gilts, the risk is that the UK will go bust. A safer bet but hence the current debate on our credit status.

53. david brough

Quite right Sally, and let’s not forget the “Big Bang” under the trolls’ heroine Thatcher, which her followers Blair and Brown refused to undo.

It defies belied that the government whinges about priviliged Tories. They are fucking priviliged Tories themselves. Essentially they are just slagging off a faction of their own party.

I bank with the Co Op myself and I always shop at their outlets. They can fuck off with their sympathy for these corner shops, most of whose owners hate and despise the workers.

Lee & John B, you obviously had your money on deposit in these Icelandic banks.

Actually, no: I looked at the regulatory situation (this was in early 2008), and stuck the money I was considering putting with Icesave on deposit with an Indian bank that was directly part of the UK compensation scheme.

But at the time, I’d been seconded to the insolvency department of the professional services firm I worked for to deal with a massively over-extended Icelandic company that was trying to work out how much of itself it could save and how much would have to go bust, had just finished working on a deal for an Icelandic client which had collapsed because the banks had suddenly withdrawn all credit out of sheer panic, and had just had a lot of chats with my colleagues about the number of other ropey firms they were dealing with whose main creditors were Icelandic banks.

I don’t think it’s reasonable to expect The Man In The Street to have access to that kind of commercially confidential information about a foreign country’s economy before he decides whether to stick his money in Apparently UK-Based Foreign Bank 1 (say, Santander) or Apparently UK-Based Foreign Bank 2 (Icesave).

At risk of invoking Godwin’s law, we have to be very wary of self-righteously imposing reparations on a country that it cannot reasonably afford.

56. Strategist

@46 Thanks very much for that Phil.

John B, please can you help me to get these figures straight.

In your response @6 you said that the Icelanders are only being asked to stump up for the first Euro21k of each deposit account for British & Dutch depositors. We’re calling that £18k at the rate of exchange at the relevant time. The total cost of that you state to be US$5bn.

You also say that the amount owed to the British taxpayer is around US$10k per Icelander. With 320,000 Icelanders, that’s $3.2bn. (OK – let’s assume the remaining $1.8bn is between Iceland & the Dutch.) Let’s say that is £2.1bn at 1 pound = 1.5 dollars.

Meanwhile Tim @19 quotes from the Times article you linked to @18 (which now has a broken link, so I can’t read it myself) that the cost of the bailout to Britain is as follows:

* Cost to Treasury of compensating the first £18k and then amounts over £50k = £800m
* Cost to FSCS of compensating the amounts between £18k and £50k = £1.4bn.
Total cost = £2.2bn

So it seems pretty obvious to me that Tim Worstall is right that the British are asking for the cost of reimbursing every penny of every deposit – which was a unilateral decision taken by Darling/the UK Government.

So, I put it to you that your article is profoundly incorrect, as are your responses @7 & 10 to Petur from Iceland @6. Any response? (Tim has in effect already pointed this out @19, and you have not yet responded directly to his comment on that.)

57. Strategist

Meanwhile – what is interesting to me is this figure of £800m cost to the Treasury for the amounts below £18k and above £50k. Does anyone have figures for how that breaks down?

Are the Treasury trying to conceal the cost of bailing out those who had more than £50k cash in Icelandic accounts? And in particular the cost of bailing out those high rollers with (say) more than £100k – people who either had more money than sense or were out-and-out gamblers, both of which types deserved to take a bath for not looking more closely into the security of these exotic institutions.

My guess is – only a guess at this stage – is that there might be a surprisingly small number of names getting a large piece of that £800m. It would be interesting to know who they were.

It is frankly ridiculous that Strategist has to do back of the envelope calculations on what ought to be a transparent situation.

Either the Icelandic government or our own should be coming clean on this.

Where are the facts?

So it seems pretty obvious to me that Tim Worstall is right that the British are asking for the cost of reimbursing every penny of every deposit – which was a unilateral decision taken by Darling/the UK Government.

Right that the British are asking for the cost of reimbursing 100%, Worstall on the question of this being a unilateral decision by the UK government.

What needs to be pointed out is that this isn’t about “the Icelandic banks” – it’s specifically related to Icesave. The UK also paid out on Kaupthing and isn’t asking for the money back.

The difference is that Kaupthing UK was a subsidiary with a UK banking licence, while Icesave was a brand name for Landsbanki, an Icelandic bank with no UK licence (operating under EEA cross-border privileges).

When Landsbanki got into trouble, the Icelandic government first assured the UK government that it was solvent, then assured the UK government that it was guaranteed by the Icelandic state, then nationalised it. On that basis and in agreement with the government of Iceland, the UK paid out the depositors and took ownership of their Icesave deposits

Then, after the fact, the Icelandic government, having set up Nyi Landsbanki (New Landsbanki, the vehicle which it used to nationalise Landsbanki), announced that it would only be moving over the liabilities from the domestic branches of Iceland, not the Icesave accounts – whether this discrimination is legal or not is a matter of disagreement, but if it wasn’t, then the Icelandic government would be liable for 100% of the deposits (including the local authority and corporate deposits).

The fact that losing the discrimination case would massively increase the liability is the main reason why the Icelandic government was keen to settle out of court. They did, then, in fact, settle out of court, agreeing that they had an obligation to the UK and Dutch governments. Then they tried to pass a bill capping their payments at 6% of GDP (a substantially lower figure than the cost of bank bailouts for lots of other countries). The UK and Netherlands didn’t go for this, and a new bill was passed in December agreeing to a different (but still very generous and protracted) set of repayment terms.

This obligation to maintain normal and honest relationships with major trading partners was (obviously) a condition of the IMF loan, because the IMF doesn’t want to be in the business of lending large sums to people who suddenly renege on deals. Iceland have consistently done so, and only agreed to the final repayment terms because their wizard wheeze to borrow $4bn off the Russians instead, secured against a vital NATO air force base, foundered on the rock of even Vladimir Putin not wanting to touch that one with a ten foot pole.

The basic story here is that a small and wildly self-regarding Nordic nation, with a history of electing right-wing governments on the back of get-rich quick schemes, did so. Then that right-wing government proceeded to deal with its creditors in an amazingly stupid and dishonest manner because it wanted to pretend that something close to boom levels of consumption could be sustained. Then it all fell apart and a left-wing government was elected and started trying to clean up the mess. Then the elected President (from the same party as said right-wing government) decided to veto the solution. And this is, in some way, Gordon Brown’s fault.

There were 300,000 Icesave UK customers.

If they all had gbp18k or over in their accounts, the compensation bill just for the Icelandic statutory compensation would be gbp5.4bn.

Obviously, many customers will have had less than gbp18k in their accounts – however, the gbp800m figure from the Times report sounds far too low.

Thanks for that D2. Glad to know the background.

DSquared,

Thank you for that. Very helpful.

One further question though – you suggest that, at 6% of GDP the Icelandic bailout is smaller than that of other countries. But the nature of the bailout is surely different. This bailout is a direct payment to depositors – many of them foreign and therefore a dead loss to the Icelandic economy. By contrast, the larger bailouts of other countries take other forms – insurance, equity injections, lending – which may produce returns. The UK Government has put huge amounts of money at the disposal of the banking sector but it does not expect to lose the lot. It may not know precisely what the scale of the losses will be in the end but it can at least cross its fingers and hope that its equity stakes in banks will appreciate and the various asset insurance schemes will not be called upon too much. It isn’t simply forking over £80 billion to, say, China and accepting that there’s nothing to be done about it.

If I were an Icelandic citizen, I’m not sure which way I’d vote but I’m certain I’d want the Government to hold a referendum about it.

Iceland is faced with a choice – they can make the payments, which will be painful, or accept the consequences, which will be painful in a different way. Neither option is palatable but the difference between despotic governments alluded to above and democratic ones like Iceland’s is that they give their people the choice.

If I were one of the Icelandic government’s negotiating partners I’d have the right to demand that it campaign hard for the acceptance of the payments and I would be making the implications of rejection clear. But I don’t see that I could do more than that to a democratic government – other than grumbling that they should have told us about their intention to hold the referendum at an earlier point.

Just to add a little more to this, if we go on Larry Elliott’ figures and take the £3.4 billion over 14 years at 5.5% we get an annual repayment of £355million. That works out at around 3% of Iceland’s GDP.

Strategist:

Yes, I had money in icesave (£1k, all of my savings at that time). I fairly promptly received correspondence from those dealing with the fallout given Icesave were basically locked down. It wasn’t long until the paperwork was filled out and on time I got my money back courtesy of this government.

I have, with all honesty, no bad feelings about Icesave. My comments at the time given a) my age and b) the level of money that could have been lost were that it was “pretty shit luck” and “if I lose it then it could be worse”. However all advise that I was able to take from various sources was that even though it was a great savings ISA to go with, as long as nothing more than the maximum (£18k) was going in it would be guaranteed under European Financial law. The expectation that any saver would have had, any reasonable lay person, was that up to the limit they would get their money back if anything went wrong given it was a bank trading in the UK for all intents and purposes.

The reason why I’m arguing what I’m arguing now is because it is simple and plain common sense and logic. The banks bailed people like me out. If “people like me” were reckless and were spending lots of icesaves credit like it was going out of fashion, and the UK had to bail out the debt I owed to icesave after it had collapsed, then I would be completely behind any argument that states to leave Iceland alone.

But the reality is really much more simple. An amount of money went in to an Icelandic bank. That bank went bust and was unable to pay back our money. UK did it for them on the pretence that Iceland, who nationalised the bank, would do the right thing and reimburse. If Iceland don’t pay back the debt all they are doing is financing their own stability, and through the nationalisation of the bank financing their own countries public services, with the money that was earned by people here in the UK.

Who specifically put money in to savings and isa’s with Icesave doesn’t matter, where they got their money…it’s all irrelevant because as long as you weren’t putting huge amounts in you were supposedly legally guaranteed to get the money back. I personally find the idea quite ridiculous that in a period of the biggest part of the banking boom investors would choose to chop up their fortune in to hundreds of £18k accounts on a 6% tax free interest, just to take advantage of the legal protection, rather than go for the much more substantial gains of a proper investment portfolio. But like I say, if they did, it’s besides the point as those were the rules.

Icesave knew it, Iceland knew it when they nationalised the bank. It is quite simply morally wrong for that country to have taken millions…billions…of money from the UK, potentially and most likely from the pockets of people that simply wanted to save for their families or retirement, and think that they don’t need to pay it back because it is more convenient for their own tax payers that way. This is what I am annoyed about, and it is completely separate from my experiences personally with Icesave.

“Iceland is faced with a choice – they can make the payments, which will be painful, or accept the consequences, which will be painful in a different way. Neither option is palatable but the difference between despotic governments alluded to above and democratic ones like Iceland’s is that they give their people the choice.”

Yes, they give people the choice to decide on the effects of other populations in the world that don’t have a say in that “choice”. How extremely democratic. Like I alluded to earlier, let’s hold a referendum here as to where we build all of our next half a dozen or so nuclear plants, the options “London” or “Reykjavik”, seems like a fair “choice” for us to make as long as it’s done through a referendum, aye?

Edit: I screwed up my sums, will come back later with the proper ones.

67. Strategist

Thanks for these contributions, and helping out with the facts. I don’t agree with all the editorial, especially some of that from d squared.

Obviously, Lee Griffin, I do not begrudge you your £1k back courtesy of the British or Icelandic taxpayer. In return I’d like to see some of the newspapers with their “best buy” tables, and the ratings agencies who said Icesave was safe, sued by someone somewhere.

My main point is that I suspect there are a number of very very rich City slicker professional casino gamblers hiding behind poor “innocent victims” such as yourself. They will have had had significantly more than £1k – & significantly more than £50k – in Icesave, and they have also been reimbursed every penny, at our expense (and, putatively, at the Icelanders’).

I very much do mind bailing these people out. When they gamble and win, they keep the money; when they gamble and lose, they send the bill to the taxpayer. Moral hazard – and they are already at it again.

At the moment it appears to be that the Treasury *may* be hiding the cost of bailing these people out by bundling it up with the cost of bailing you out (£800m to reimburse the first £18k of deposit accounts, and the value of balances over £50k).

That’s a potential scandal made in Britain of concern to taxpayers both British & Icelandic, and I’d like to see a bit more light shed on it.

“My main point is that I suspect there are a number of very very rich City slicker professional casino gamblers hiding behind poor “innocent victims” such as yourself. They will have had had significantly more than £1k – & significantly more than £50k – in Icesave, and they have also been reimbursed every penny, at our expense (and, putatively, at the Icelanders’).”

They may well have done, but that is the biggest risk of all…there was no guarantee they would get that money back in advance, so to bet on it happening would be almost godly.

But I must reiterate that Iceland is not going to be paying for anything more than the loan given to them (£2.2bn) to pay off the EEA guarantee amount. The 3.8bn Eur that they are required to repay is 2.6bn Eur of UK loan plus 1.1bn of Dutch loan, both made at the end of 2008.

I’ve elaborated on my temporary blog http://bit.ly/6qa0zL <—

69. Strategist

By the way, good interview from the Icelandic president on Newsnight, Paxo playing the part of thinly briefed know-nothing English arsehole so well, you might almost think that was his real character.

The Icelander may well be playing some naughty internal party politics by calling the referendum, but his defence that Iceland is a democratic country where the people are sovereign was well put, and utterly perplexed that daft twat Paxo.

http://www.bbc.co.uk/iplayer/episode/b00pv1jp/Newsnight_06_01_2010/

Piece starts at 23’50” approx.

Finally, amongst all the really good stuff at http://icelandweatherreport.com/

I enjoyed this message: “People of Britain: surrender, and we will take all our freezing weather back!”
The people of Iceland.

It’s very easy to play the democracy card in order to get out of paying debt, but ignoring the democracy card that got them in to needing to pay the debt in the first place, isn’t it?

71. Strategist

Lee @68

“But I must reiterate that Iceland is not going to be paying for anything more than the loan given to them (£2.2bn) to pay off the EEA guarantee amount. The 3.8bn Eur that they are required to repay is 2.6bn Eur of UK loan plus 1.1bn of Dutch loan, both made at the end of 2008.”

This is the key fact at issue here. I remain to be convinced that you have got this right. The only figures we have seen so far were from the Times (link, unfortunately, has disappeared):

* Cost to Treasury of compensating the first £18k and then amounts over £50k = £800m
* Cost to FSCS of compensating the amounts between £18k and £50k = £1.4bn.
Total cost = £2.2bn

Now you are saying that £2.2bn covers the cost of deposits under £18k only.
Happy to accept that if you can source it. But at the moment, I don’t.

I’m guessing that the typical (ie the mode, out of the mean, median and mode) sum in a Icesave deposit account would have been closer to the £1k in your account than the £18 or £20k max for the guarantee scheme.

I’m still wondering if the bailout of a handful of people with hundreds of thousands or millions held in a gamble on Icesave’s impausibly high interest rates are hiding behind people like you.

Phil Hall @46 links to the Treasury

“Now you are saying that £2.2bn covers the cost of deposits under £18k only.
Happy to accept that if you can source it. But at the moment, I don’t.”

The UK government loaned Iceland 2.6bn Eur. The Netherlands loaned 1.1bn Eur. Together these two amounts roughly add up to the 3.8bn Eur.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3491442/UK-Treasury-lends-Iceland-2.2bn-to-compensate-Icesave-customers.html

I don’t quite see the scandal as both these amounts are documented as having been loaned, and they add up to the amount the UK and Dutch governments wish to be repaid before interest.

Quite simply the amount that was guaranteed or not by the UK is irrelevant as what the UK *did* loan was £2.2bn.

“I’m still wondering if the bailout of a handful of people with hundreds of thousands or millions held in a gamble on Icesave’s impausibly high interest rates are hiding behind people like you.”

I don’t know where the implausibility comes from. Icesave weren’t the only account offering a high interest ISA, though they were offering it at such a rate for the longest. But I guess that’s a separate issue.

73. Strategist

Lee – Let’s just check here: are you definitively rejecting the version of the figures in The Times quoted by Tim Worstall @19?

“The FSCS will repay any further savings up to the usual threshold of £50,000 at a cost of £1.4 billion, with the Government stepping in to cover any amounts above this threshold. The total cost to the Treasury of compensating the first £18,000 of savings, and any sums above £50,000 is £800 million…”

“I don’t quite see the scandal”

I’m just trying to establish the facts. Is the £2.2bn the entire cost of the bailout or the cost of the sum of the first £18k in each account?

“Lee – Let’s just check here: are you definitively rejecting the version of the figures in The Times quoted by Tim Worstall @19?”

I’m definitively saying that they’re irrelevant to the reason the $5bn figure has been reached between Iceland, UK and Dutch governments.

“I’m just trying to establish the facts. Is the £2.2bn the entire cost of the bailout or the cost of the sum of the first £18k in each account?”

The UK loan was purely to allow Iceland to pay the guarantee immediately rather than wait for potentially years before paying savers back their money. In that sense it can only have been a loan to cover the amount of the first 20k Eur (which is the official amount, and in money at the time was around £16.5k rather than £18k now)

However if I am misguided, as I don’t know the finer details of how that figure was reached and loaned; regardless of what the loan amount covered it was the amount the Iceland agreed upon and took from the UK. That is the amount being paid back.

It could, for all intents and purposes, have covered none of the cost of the bailout and all of the cost of Icelandic vegetable consumption…the only thing that matters is that the UK loaned $X and now they want an agreed framework put in place to pay $X back.

75. Strategist

“the only thing that matters is that the UK loaned $X and now they want an agreed framework put in place to pay $X back”

Hmmm. You’d make a good loan shark, Mr Shylock Griffin…

One response to this would be to say, yes, and “agreement to the framework” from the Icelandic perspective is dependent on a referendum of all the people. As President Grimsson claimed on BBC Newsnight, under the Icelandic constitution the people are sovereign.

Another would be to say that it’s not the only thing that matters as far as I am concerned. I think there is a big difference between sending Iceland the bill for bailing out the first £18k of every account, and sending them the bill for every penny of every account, even those of big City casino gamblers in millions – a high roller’s dream deposit guarantee that was unilaterally dreamt up by Darling and which I suspect may have prevented a lot of rich men in red braces from losing their shirts, which they deserved to do.

Remember the Icelandic government that foolishly – or crookedly – agreed to take on the obligations of those failed banks in a panicked & confused meltdown situation was literally thrown out of office by an angry mob of Icelanders who had no part in the excesses of their banking sector.

“I think there is a big difference between sending Iceland the bill for bailing out the first £18k of every account, and sending them the bill for every penny of every account”

We’re sending them the bill for repaying every penny of the loan that we gave them There is nothing else! As I said above I’m very certain we only gave money to cover these initial £18k payments. This link seems to confirm it, http://news.bbc.co.uk/1/hi/7664853.stm, however even if that wasn’t the case Iceland accepted the money

If they were so worried about the level of money people were “forcing” on them why didn’t they call a democratic referendum then and stop accepting our cash? Oh…right…

“Remember the Icelandic government that foolishly – or crookedly – agreed to take on the obligations of those failed banks in a panicked & confused meltdown situation was literally thrown out of office by an angry mob of Icelanders who had no part in the excesses of their banking sector.”

You are a little confused if you think that the government agreed to take on that obligation as if they had a choice. EEA law states that the member state is responsible for repaying the first 20k Eur of retail despositor accounts.

Lee: this is the point. They’re being asked to pay back more than just that €20 k guarantee. They’re being asked to make all depositors whole.

No they’re not, they’re being asked to pay back the $5bn that is the cumulative loan from the UK and Dutch governments. They are also being asked to ensure that ALL of the loan is repaid, even if it takes longer than the 2024 deadline (which I believe is the date set in the EEA that would normally make their legal obligation to repay the 20kEur amount to depositors, though I may have misread that)

http://news.bbc.co.uk/1/hi/business/8435662.stm

If you have other information let me know, but the reported contents of the bill, which is only an amended version of the earlier bill that was asking for the same amount of money but without the guarantee of the entire loan being repaid (and perhaps different interest rate agreements, I’m not sure), don’t suggest what you’re suggesting.

79. Strategist

Pardon me, Lee, but I think you are the one who is a little confused.

You say on the one hand “I’m very certain we only gave money to cover these initial £18k payments.” and then immediately “This link *seems* to confirm it…however even if that wasn’t the case…”

The fact is that it is far from clear on the evidence anyone has presented on this site so far. All I’m doing is asking to look at the figures for the cost of the bailout.

Your clincher that Iceland had the obligation under EEA law only works if you are right that the £2.2bn only covers the first £18k’s. If that is not the case – something entirely possible as you have acknowledged a few times – then your argument no longer works.

Meanwhile, put all this stuff about “they accepted the money” in bold all you like, this doesn’t alter that you’re basically taking a classic loanshark’s stance about having signed on the dotted line.

Look at the case of the complete prick from the Christie Hospital NHS Trust who put £7.5m (including £6.5m charitable donations!) into a fucking Icesave internet account. That individual should have had his bollocks mounted on a spike at the gates of the City of Manchester. Instead Darling gave him his money straight back.

What I want to know is whether Darling has passed on a bill for £18k or for £7.5m on to Iceland for that particular debacle.

And how many less tear-jerkingly wonderful good causes are hiding behind Christies Hospital in the dirty business of getting their stake refunded on a bet that they lost fair & square.

“What I want to know is whether Darling has passed on a bill for £18k or for £7.5m on to Iceland for that particular debacle.”

The figures are right there mate, the statements are right there. If you’re going to chose to continue to ignore them in search of a great Labour scandal then fine.

I’ll go away with historical accounts and reports that state the money was given for the purpose of fulfilling their obligations to depositors, and that the money was handled through the IMF explicitly to save the Iceland economy, and the figure of repayment that correlates exactly with that amount…and you can go away with your conspiracy theory, and we’ll both agree to disagree.

81. Strategist

“The figures are right there mate, the statements are right there.”

Where? Where? I see nothing definitive. The only thing that looked like a breakdown of the numbers was from the Times article, and this was the opposite of what you are asserting.

It doesn’t take a conspiracy theorist to be careful with what’s hiding between the lines of a Treasury press release, it takes someone who wasn’t born yesterday – and any Labour Party supporter worth his salt would tell you that. So I’ll thank you to be less free with your cheap shots, “mate”.

But I agree that this argument is going nowhere till somebody comes in with some new and more definitive information.

“despite the extremely generous payment terms”

Interest of 5%? Far larger compensation than EEA laws actually require? Yeah, right.

Well that’s my opinion, you’re free to yours, though I highly suspect mine is based on the realities of the situation while yours…as so many on this thread…will be based on conspiracy and the need to extol the socialist and anti-capitalist mantra! Fun times!

Well, click the link, Lee, and tell me whether you think it is a “socialist and anti-capitalist mantra” blog.

My information may be wrong, but having read through the debate, I can’t say that I’m convinced of yours yet.

That makes two of us, I don’t even know where you get this concept of “Far larger compensation than EEA laws actually require”.

The debate Strategist and yourself have just had (as if I really needed to remind you of it), plus the news article you yourself provided.

87. Michael Lewis

Banks shouldn’t have been bailed out. Socialising losses is the ultimate moral hazard. That’s hard for many socialists to accept: the average taxpayer shouldn’t be bailing out other peoples poor investment decisions. People who put money into Icesave were doing so to chase yield, otherwise they’d have bought German Government Debt, put it with HSBC , bought Gold, Silver, Commodities , whatever.
Tough I say – don’t expect other people to pay for your mistakes.

“Then the elected President (from the same party as said right-wing government) decided to veto the solution. And this is, in some way, Gordon Brown’s fault”

Actually Olafur Ragnar Grimsson, (the President) is very much a socialist and has nothing to do with the Independence Party. Considering he received a petition from 25% of the population to oppose the current IceSave bill, he had little option but to reject it given that in Iceland the people are sovereign unlike in the UK where parliament is. This does not mean that the money will not be paid back, it most certainly will. What most people in Iceland are unhappy about is the current terms of the deal that has been forced upon Iceland by the UK and Netherlands which means 4 billion pounds has to be paid within an 11 year period and a 5.5% interest rate. The would amount to a total of 40,000 pounds per Iceland household. Given the sheer size of the debt, it would be highly unlikely that Iceland would be able to mount a sustained economic recovery while paying such vast sums of money in such a short space of time (they already have a large amount of debt on top of this).

Given the relatively tiny sums involved for a large country like the UK, why do they insist on such unfair terms of repayment. If the terms were more reasonable, it would be far more likely that Iceland would actually be able to repay the full amount they are responsible to pay without a sovereign default which would be increasingly likely under the current terms.

The UK has handled the situation as if it is negotiating the surrender terms of a hostile nation it has been at war with rather than a small peaceful democratic society on a frozen north Atlantic island. I think there has been a lot of misunderstanding in the UK with people actually believing Iceland doesn’t want to pay the money, we do but on fair, reasonable and respectful terms.

“Tough I say – don’t expect other people to pay for your mistakes.”

Dam ,I wish I lived next door to you. I could then laugh at your misfortune every week. And you could not say zip about it,

Always fun to watch the Union jack waving trolls support another country rather than their own people, just so they can make their pathetic politcal point scoring.

Tories are traitors.

Sally, what are you on about? I’m not British and I am certainly not a Tory

92. Michael Lewis

Grow up Sally. Why should an individual cover the failure of others to properly understand the risks they were taking? They simply should not. Tough luck to those that invested in Icesave, even a remedial amount of due diligence and they wouldn’t have invested. I don’t see why people expect other people to pick up the cost of their own mistakes. We certainly shouldn’t have done it with RBS or HBOS.

@68, 71-81

The word from Iceland is that it is just the first Euro21k from each Icesave account that Britain & Holland are seeking recompense for. Whatever sum this amounts to may not necessarily equal the full value of the £2.2bn inter-governmental loan from UK to Iceland.

So Lee Griffin, you appear to be right, and I’m happy to concede the matter. The Times article linked to @19 has miraculously reappeared, and is fairly straightforward. However, I don’t regret having pressed this issue, given that the numbers looked fishy, and I think it was worth checking things out.

http://www.citywire.co.uk/adviser/-/news/regulation-training-and-competence/content.aspx?ID=375896&Page=1

This article in City Wire of 12 Jan by Iain Martin reopens the question of 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.”


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