Page last updated at 16:43 GMT, Thursday, 9 October 2008 17:43 UK

Icelandic compensation to start

A Kaupthing branch
Kaupthing Edge was the UK arm of Kaupthing

Thousands of UK customers of two collapsed Icelandic banks will receive application forms for compensation for their lost savings in the next week.

Most customers of Kaupthing Singer and Friedlander (KSF) and Heritable Bank will have compensation automatically transferred to ING Direct.

But 3,000 savers with KSF and around 100 Heritable depositors will have to a make a claim for their compensation.

Icesave customers should learn on Friday how to claim their compensation.

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

Getting the cash back

Some 180,000 UK customers had accounts with KSF and Heritable.

The Financial Services Compensation Scheme (FSCS) is covering their losses up to 50,000 each, with the Treasury topping up any savings above this amount.

The vast majority of customers will not need to do anything as the money will be transferred directly to ING Direct, which is taking over their accounts.

They will have immediate access to their accounts, the FSCS said.

But 3,000 savers who did not have internet accounts with the bank, and 100 Heritable Bank customers whose accounts have not been transferred to ING Direct will have to make a claim to the FSCS.

Iceland rescue

ING Direct is acquiring 2.5bn of deposits and 160,000 customers from KSF and 538m of savings held by 22,200 people with Heritable Bank.

Icesave letterhead
UK customers have been unable to get at their Icesave accounts

KSF was part of Iceland's biggest bank Kaupthing, which was nationalised on Thursday.

Heritable Bank, which was part of Landsbanki, was placed into administration with Ernst & Young on Tuesday.

Landsbanki also owned Icesave, which had 300,000 customers in the UK when it closed.

Saving Icesave

Icesave customers' money is safe, but more details are expected on Friday about how they will be able to claim their savings back.

The first 20,000 euros of their savings should come from the Icelandic compensation scheme with the rest covered by the UK authorities.

Icesave customers will likely only have to fill in one form to claim back their money which remains frozen in Icesave accounts.

Prime Minister Gordon Brown said the UK government, which has guaranteed savers' money, was doing it all could to recover the savings from Iceland.

Iceland's Prime Minister Geir Haarde said he was angry at how the UK government had handled the situation.

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