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Iceland close to £3.3bn UK loan for Icesave compensation

Fri, June 06, 2009

Iceland has almost agreed the terms of a £3.3bn loan from the UK Government to cover the cost of compensation for British savers who lost money when Icesave collapsed.

Johanna Sigurdardottir, Iceland's new prime minister, said the country was on the brink of agreeing to repay the loan with interest rates of 5.5pc over a period of seven years.

She hopes that the assets of Icesave's failed parent company, Landsbanki, will cover up to 95pc of the loan, when they are sold out of administration.

More than 300,000 UK citizens lost money in their Icesave accounts because of the Icelandic banking crisis, when three financial institutions, Landsbanki, Kaupthing and Glitnir, failed over three days last October.

The situation developed into a diplomatic row over who was liable for the losses, after the UK froze the assets of Landsbanki using legislation designed to combat terrorism..

However, Iceland agreed to cover the cost of up to €22,000 (£19,250) per customer with Icesave, with the help of a loan from the UK. The Treasury and the Financial Services Compensation Scheme have already agreed to compensate customers above this threshold. Charities, councils and other creditors are slowly being repaid from the proceeds of asset sales.


Source:Telegraph.co.uk