Icelandic Internet bank suspends UK accounts

October 7, 2008

The Icelandic internet bank, Icesave, has suspended all 300,000 of its UK customer accounts, leaving account holders in the United Kingdom unable to withdraw or deposit any funds. A message on its website posted this morning states:

'' "We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly." ''

The internet bank, owned by the Icelandic bank, Landsbanki (Landsbankinn), which was recently nationalised in an attempt to rescue it, has been hit by the global financial crisis. Reports from the United Kingdom suggest that the traders and city are preparing for the parent company to be declared insolvent, leaving customers to recover their monies through a financial compensation scheme being backed by the Icelandic Government. The plan will cover the first € 20,887 (Approx £16,300 / $28,720), the remainder of the customers funds being recovered through the UK's own financial compensation system.

Following the decision to nationalise Landsbanki, the Icelandic Prime Minister, Geir Haarde, who introduced and signed the emergency legislation into law, stated:

"What we are doing here is saving a banking system - saving the domestic banking system - and making sure that it can function properly. And I think, also, through our declaration on domestic deposits in these banks and saving institutions, we have been able to avoid a run on the banks here, and therefore prevent it."

In describing and explaining its actions in nationalising the bank, the Icelandic Financial Supervisory Authority issued this brief statement:

"Based on new legislation, the Icelandic Financial Supervisory Authority (IFSA) proceeds to take control of Landsbanki to ensure continued commercial bank operations in Iceland. Domestic deposits are fully guaranteed, as declared by the government. Landsbanki's domestic branches, call centres, cash machines and internet operations will be open for business as usual."

In response to the deepening world financial situation, the Dutch government has this afternoon increased its savers protection from €38,000 to €80,000 effective immediately, to help secure the financial status of its savers within Holland. Icesave also has a Dutch branch, icesave.nl - their website was unreachable at the time of this article.