Page last updated at 13:13 GMT, Wednesday, 8 October 2008 14:13 UK

Icelandic bank savers bailed out

Cash
UK savers have been affected by the situation in Iceland

Tens of thousands more British savers have had their savings, worth more than 3bn, protected by the UK authorities.

ING Direct has agreed to take over the 2.5bn of deposits of 160,000 UK customers of Kaupthing Edge, the online arm of Iceland's biggest bank.

It is also taking 538m of savings held by 22,200 savers with Heritable Bank, which was run by Iceland's Landsbanki - owner of the now closed Icesave.

The UK Treasury said the banks were in default but savers money was now safe.

'Business as normal'

The Treasury, Bank of England and Financial Services Authority have taken their action to protect the UK customers of Kaupthing Edge by putting into administration its UK banking group, Kaupthing Singer & Friedlander (KSF), which holds the deposits of Kaupthing Edge's UK customers.

ING Direct is working to rapidly ensure that it is business as normal for all customers
UK Treasury statement

Savers with money held by KSF, that is not related to the Edge internet bank, will be able to get their money back by claiming from the Financial Services Compensation Scheme (FSCS).

However they will be repaid in full, not just to the current 50,000 compensation limit.

"The FSCS working with the administrator of KSF will endeavour to contact these individuals and make payments to them within two weeks," said the Treasury.

Heritable is a UK bank owned by Landsbanki and was placed into administration with Ernst & Young yesterday after the parent bank was nationalised by the Iceland government.

When that takeover took place Icesave was closed, leading to a decision by the UK authorities on Wednesday morning to guarantee all the savings of its UK customers.

The Treasury confirmed that customers of both the Heritable and Kaupthing Edge should be able to operate their accounts again shortly.

Very pleased

ING Direct is a subsidiary of Netherlands-based ING Group. It already has more than a million customers in the UK using its online banking services.

"ING Direct is in a position of strength," Johan de Wit, chief executive of ING Direct UK.

"We are very pleased to have been able to take such rapid and decisive action that has provided Heritable Bank's customers, and those of Kaupthing Edge, with the reassurances they need.

"We are working to rapidly ensure that it is business as usual for all customers."

Kaupthing is Iceland's largest bank and says it is still secure despite the continuing financial crisis in that country and its decision to take an emergency loan from Sweden.

Accounts taken over

When the rescue deal goes through, the situation will be similar to that seen when Spanish bank Santander took control of Bradford & Bingley savers' deposits.

The Heritable accounts being moved are its retail fixed rate bonds; 50+ Saver; 60 Day Notice; 90 Day Notice; 120 Day Notice, Online Saver; Direct Saver and Easy Access accounts.

The ability of the FSCS to make payments to certain KSF customers is being financed directly by a loan from the Bank of England.


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