UK recovers additional £1.36 bn from collapsed Icelandic bank

20 Dec 2014

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The UK treasury has recovered £1.36 billion more from Iceland's Landsbanki estate for which it became the largest creditor at the height of the global financial crisis in 2008.

''Today's payment marks another significant milestone in the government's efforts to recover the costs to taxpayers of the financial crisis, and is the product of sustained engagement between the economic secretary, Andrea Leadsom, and the Icelandic authorities,'' a statement issued by the treasury said.

Landsbanki was one of the largest commercial banks in Iceland prior to its collapse. It operated as Icesave in the UK and the Netherlands. Icesave was an easy access online saving scheme which turned out to be a huge success as it guaranteed interest rate higher than Bank of England's base rate.

Icesave was operating under European Union's single market rules and as a result, when the bank went bust in October 2008, only the Icelandic scheme depositors and not the Icesave depositors were fully covered under the British and Dutch deposit insurance.

The UK government, through its deposit guarantee scheme became Landsbanki's largest creditor, paying out around £4.5 billion to British retail depositors when the Icelandic deposit insurance scheme failed to meet its obligations.

To date, the UK government has recovered £3.82 billion or about 85 per cent of the total taxpayer's money, following on from four previous payments.

The government remained committed to recovering the full outstanding amount of the British taxpayer's money from the Landsbanki estate, and was on the course to recover the full amount by 2017, Andrea Leadsom said.

The treasury plans to use the payment received to pay down the national debt.

''A key part of our long term economic plan is getting taxpayers' money back from the financial crisis, including the collapse of Iceland's banking system in 2008,'' Leadsom said.

'The failure of the Icelandic banks cost taxpayers billions of pounds, with no certainty of ever getting the money back. We remain committed to recovering the full outstanding amount of the British taxpayer's claim from the Landsbanki estate, and will continue to work hard to make this happen as soon as possible,'' Leadsom added.

Separately, De Netherlandsche Bank (DNB) had paid a compensation of approximately €1.6 billion under its deposit guarantee scheme to Dutch depositors of Icesave and around €932 million has been collected from Landsbanki so far.

In August, DNB said that it has entered into an agreement with Germany's Deutsche Bank to sell its remaining claim on insolvent Icelandic bank and would no longer be a creditor of Landsbanki.

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