Page last updated at 09:27 GMT, Saturday, 11 October 2008 10:27 UK

Deal sought for UK-Iceland funds

Gordon Brown and Geir Haarde
Gordon Brown and Geir Haarde said they had agreed to work together

A Treasury delegation is in Reykjavik for talks to resolve the dispute over frozen UK investments held in failed Icelandic banks.

The group wants to establish a claims procedure for British depositors to get their money back as soon as possible.

A cancer hospital in Manchester has announced it is the latest victim of the Icelandic bank collapse.

Meanwhile, Chancellor Alistair Darling is continuing talks with the G7 finance ministers in Washington.

The Treasury delegation in Reykjavik includes officials from the Bank of England and the Financial Services Authority. The talks are expected to last all weekend.

Britain is demanding the recovery of funds deposited by local councils, as well as other public bodies, companies and charities in collapsed Icelandic banks.

After the Icelandic government took control of three of its leading banks, Prime Minister Gordon Brown strongly condemned Iceland's failure to guarantee British deposits.

Under Iceland's financial regulations, the government is supposed to pay up to 16,000 compensation per account at a total cost of 2.2bn.

More casualties

Sharp exchanges ensued between Mr Brown and his Icelandic counterpart Geir Haarde but the countries now say they will work together for a solution.

Mr Haarde said the government had introduced legislation, making the claims of depositors a high priority in apportioning the nationalised bank's assets.

However, Iceland is crippled with debt and giving UK depositors their funds may depend on the country securing emergency loans from other countries or the International Monetary Fund (IMF).

The Treasury said it wanted to "find a solution" to the crisis to protect UK depositors and enable councils and other bodies with money at stake to recover it as "quickly as possible".

Private deposits with collapsed banks Kaupthing Singer and Friedlander (KSF) and Heritable have been sold to ING Direct, where the accounts should continue to operate normally.

Private customers with Icesave are protected by the UK's Financial Services Compensation Scheme, with Mr Darling promising compensation above the usual 50,000 limit to cover all deposits.

Charity fears

The Christie NHS Foundation Trust, based in Withington, Manchester, has revealed it could lose 7.5 million.

It said the bulk of the money - 6.5 million - was made up of charity donations while the remainder deposited with Icelandic banks Kaupthing Singer and Friedlander had come from the NHS.

So far more than 100 local authorities in England, Wales and Scotland have revealed they have deposits worth 842.5m in total.

And at least 60 UK charities fear they may have lost up to 120m of funds invested in failed Icelandic banks.

Meanwhile, finance ministers from the G7 group of leading industrialised nations have pledged action to tackle the financial crisis.

They issued a five-point plan of "decisive action" to unfreeze credit markets.




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