BoE Loans GBP100m To Icelandic Bank

Wed, 15 Oct 2008

The Bank of England is giving a £100 million loan to the recently collapsed Icelandic bank Landsbanki to keep it operating in the short term while efforts are made to repay the bank’s UK creditors .

The loan, secured against assets of Landsbanki frozen by the British Government, is designed to help savers with Icesave - the bank's internet operation - and any of its other UK depositors get their money back.

The move was announced on Monday afternoon by Chancellor Alistair Darling announced following a meeting with the Icelandic Finance Minister in Washington at the weekend.

Mr Darling told MPs that an "accelerated payout" had been agreed in principle for individuals, but work continues to "facilitate claims by UK charities and local authorities on their deposits held at these Icelandic banks ".

Some £4 billion of Icelandic assets is understood to have been frozen using anti-terror laws last week, more than enough to pay back the estimated £3 billion that UK councils, charities and hundreds of thousands of individuals could lose as a result of the country’s banking collapse.

A Treasury spokesman explained: "My understanding is that Landsbanki has no working capital in it essentially."

"In order to provide the normal functions it would to its UK creditors, we are providing working capital to that business ."

"That £100 million is secured against the assets we have frozen. If we weren't to do that there might be problems for certain businesses and charities that they would not be able to access the capital that they would need," he added.

Precisely how money will be channelled to those who need it is yet to be made clear, and the Financial Services Compensation Scheme (FSCS) is still drawing up a plan on how savers will be compensated for their lost savings .
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page

Copy and Paste the following HTML into your page.

Credit Crunch Savers
HSA Dental Plan
Get covered from £7.70 per month!
Amex Cash Back
Credit Card
Get 5% cash back on purchases with Amex
Income Protection Insurance
Get an instant quote with the award winning company