Icesave is no longer allowing customers to withdraw funds - as ministers in Reykjavic, Iceland, rush to shore up the nation's financial services system.
The Icelandic government has attempted to calm savers, worried that the nation's economy might be in meltdown.
Speaking on TV yesterday, Icelandic prime minister Geir Haarde said that the government was to offer a 100 percent guarantee for all domestic bank customers' savings - and that the financial regulator was to be given greater powers to intervene in the financial firms' affairs. Earlier, trading in the nation's banks was suspended.
Thousands of Britons have taken out savings accounts with the popular Icesave and Kaupthing Edge brands - run by Iceland's Landsbanki and Kaupthing banks respectively. However, the worsening of the credit crunch and the decline of investor confidence in banks has hit the Nordic country hard.
This is because Iceland's economy is very dependent on banking, with both giant banks' balance sheets larger than the nation's GDP. Indeed, the banks' sheer size has led to saver scepticism that the government could bail out savers by guaranteeing deposits if either or both firms failed.
"We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankruptcy," Mr Haarde said. "The legislation is necessary to avoid that fate."
To this end, the banks effectively been taken over by the government in order to safeguard domestic savers. UK customers of Icesave, however, are not covered by this guarantee - due to the fact that Kaupthing and Landsbanki are registered in different ways in the UK.
As of this morning the bank is no longer allowing savers to withdraw funds from their accounts. "We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts," the provider said in a statement on its website.
"We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly."
Customers of Kaupthing Edge remain covered by the UK government's savings guarantee, which protects the first £50,000 in each account.
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Comments (7)
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garry craft
7th Oct 2008 14:00
what will the position be for non domestic savers?
Will the €20,000 guarantee remain? will the balance (up to £50k) be guaranteed by the UK government?
Vanya Wright
7th Oct 2008 20:07
Some guarantee. What use is it to "own" your money on deposit if you can't use it for anything?
Keith C
7th Oct 2008 22:37
An excellent opportunity for the all that bloated political talk to become reality. I'm sure all European savers are now listening and watching carefully (before they stampede to switch their savings). Decisive, clear and united action now please!
Compensation for full savings now guys or risk market and saver madness!
Ugly American
8th Oct 2008 00:05
This only works once.
Now nobody trusts banks in Iceland.
p.townsend
8th Oct 2008 19:07
my account was debited on Monday 6th Oct and the monies appeared off my account on that day.On tuesday when the accounts were frozen I phoned to check that the money was still being transferred,yes was the answer it had left my account and should be in the UK within 3-5 days.On phoning again today they stated that they have reversed the transaction,although it has not yet appeared back on my icesave account.Not only are we losing interest in this charade but can you really trust the banking ethics when the chips are down.I hope like all the other depositors that we are fully guaranteeed as announced by Alistair Darling, in the meantime I can not pay all my commitments in the UK without this money.It Looks like I have to go cap in hand again to the uk banks to see if they can help me out,because god knows when we will receive our money back.Angry and depressed
Maureen Morreale
9th Oct 2008 07:14
My daughter tried to withdraw her money on 6 October and paid £30 chaps, the account showed it had been processed but then £30 was refunded and no money transferred, however the £250 that she transferred into the bank was surprising cleared on 7 October when they weren't processing any more deposits, strange how our frozen accounts can still be accessed in their favour but not is ours. If their economy is largely dependent on banking I don't think it will every recover, if it wasn't for UK Government all our depositor would be hearbroken
david nadin
4th Nov 2008 02:04
what is the time scale for uk depositors having their savings returned.
are we going to be earning interest during this period whilst the accounts are frozen
