Page last updated at 14:50 GMT, Thursday, 13 November 2008

Confusion over Kaupthing savings

Kaupthing Edge logo
The Kaupthing Edge website still shows the mistaken transfers

The Kaupthing Edge internet bank continued to allow cash transfers by existing savers after it collapsed last month, breaking official restrictions.

The Icelandic bank closed on 8 October and the next day all its savers' accounts were moved to ING Direct, with no loss of money.

But until 6 November the administrators were not able to stop internal transfers on the bank's website.

The administrators from the accountants Ernst & Young blamed an "IT problem".

Collapse and administration

On 8 October the Financial Services Authority (FSA) issued a formal supervisory notice as part of the moves by the authorities to protect saver's money as the Icelandic bank collapsed alongside its rivals Icesave (owned by Landsbanki) and Glitnir.

The notice prohibited Kaupthing from taking in any more money from any customers.

The administrators managed to stop the website letting new customers open new accounts.

However, 2,300 existing customers found that they were still able to move money from their ordinary savings accounts into the bank's higher rate fixed-term deposit accounts, which offered interest at 7.5%.

"Unfortunately, due to IT systems that we were unable to disable, the apparent ability to apply for a Kaupthing Edge fixed term deposit account could not be removed from the Kaupthing Edge website until 6 November 2008," the administrators said this week in an e-mail to the affected customers.

"We did not disable the entire site as this would have stopped all customer transacting capabilities on the site causing considerable inconvenience to the customer base by not allowing them to access their money," said a spokeswoman for the administrators.

The money involved will be refunded to customers' easy access savings accounts, which are now held by ING Direct, and they will not lose any interest which the easy access accounts offer.

Everything normal?

One example of the problem came from a BBC reader, Marlene from Bournemouth.

As of today's date everything is still showing as normal in the savings and both term deposit accounts
Bill, Kaupthing Edge customer

She had moved 30,000 into her fixed-term Kaupthing Edge account in September.

Fearing that the money might be lost when she heard about the problems at Icelandic banks, she decided to move the money out to the Nationwide on 7 October.

But when she spoke to the Kaupthing Edge call centre in Nottingham two days later on 9 October she was reassured that the money was safe because of the previous day's takeover by ING.

She agreed to a suggestion that she should cancel her account closure and reinstate the money, before the transfer to the Nationwide had taken effect.

That reinstatement of the 30,000, to a new Kaupthing Edge fixed-term account, was finally completed on 22 October.

Then on 31 October she saw that the online application process for a fixed-term account was still open and decided to open another account with a further 5,000 deposit, to take advantage of the 7.15% interest rate that was still being advertised.

"This account was duly opened without any repercussions at that point to the contrary, therefore it was quite a shock this morning to find the attached mail from Kaupthing regarding the term deposits," said Marlene's husband Bill.

"As of today's date everything is still showing as normal in the savings and both term deposit accounts," he added.



Print Sponsor


SEE ALSO
Manx and UK relations top agenda
13 Nov 08 |  Isle of Man
MP calls for help for depositors
06 Nov 08 |  Isle of Man
Anger at Darling island criticism
06 Nov 08 |  Isle of Man
Icesave compensation plan starts
04 Nov 08 |  Business
UK rules out backing depositors
04 Nov 08 |  Isle of Man
Saver finally gets his 24,000
03 Nov 08 |  South East Wales

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific