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Banks: Iceland

House of Lords written question – answered on 25th February 2013.

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Photo of Lord Laird Lord Laird UUP

To ask Her Majesty's Government, further to the Written Answer by Lord Deighton on 28 January (WA 263), and in the light of the recent decision by the Court of the European Free Trade Association against the United Kingdom, what is the current net amount owed by each failed Icelandic bank and an indication of the retrieval methods they intend to or are using in each case.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

The Government expect full recovery of the amount that Iceland is liable for regarding failed banks.

During 2011-12, the administrator for Icesave paid out dividends to HM Treasury and the FSCS of £1.3 billion. Of this, £0.4 billion was used by the Financial Service Compensation Scheme to repay part of the loan with HM Treasury, £0.7 billion was allocated to the Depositors' and Investors' Guarantee Fund share of the loan and the remaining £0.2 billion was used to reimburse HM Treasury for its statutory debt payments for deposit balances in excess of £50,000.

On 28 January, the European Free Trade Association Surveillance Authority lost its case in the Court of the European Free Trade Association against Iceland for breach of its obligations under the EU deposit compensation arrangements. The UK was an interested party in the case because a ruling against Iceland would have allowed the Government to seek interest from Iceland for the pre-financing of £2.3 billion of compensation paid out to UK depositors of Landsbanki h.f.'s UK branch in place of the Icelandic Depositors' and Investors' Guarantee Fund when it failed during the financial crisis.

Details of HM Treasury's claims in the administration of Landsbanki h.f., Heritable Bank Plc and Kaupthing Singer & Friedlander Ltd (KSF) are set out in Sections 30, 31 and 33 of the Treasury Annual Reports and Accounts 2011-12.1

Further details will be published in the Treasury Annual Reports and Accounts 2012-2013 later this year.


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