FTAdviser.com

Advertising

At the same time, ING Direct has stepped in to take on all of Heritable's (Icelandic bank Landsbanki's other UK-based banking subsidiary) retail deposit business.

The transfer to ING has been backed by cash from HM Treasury and the Financial Services Compensation Scheme (FSCS), while the remainder of Heritable's business has been placed into administration.

The moves come as the government looks to calm concern about the security of savers' deposits in both Icesave and Heritable, after Iceland's authorities nationalised their parent bank Landsbanki yesterday.

In a statement, the Treasury said Chancellor Alistair Darling had "put in place arrangements" to protect savers' deposits, even if Landsbanki is declared in default, as the UK authorities expect.

As such all of the Landsbanki's UK assets have been frozen until its future position and that of its UK creditors becomes clearer.

The Treasury said it was also working with the FSCS and the Icelandic authorities and their Deposit Insurance Scheme to ensure that all Icesvae depositors were paid back as quickly as possible.

Arrangements are also being put in place to ensure that all of Icesave's ISA customers of will continue to benefit from the tax-free status of their accounts.

Meanwhile, the transfer of Heritable's retail deposits comes after the Financial Services Authority (FSA) ruled that Heritable was in default for the purposes of the FSCS, as it was likely to be unable to continue to meet its obligations to depositors.

As such, any retail depositors whose business has not been transferred to ING, and who are eligible to claim under the FSCS, will be paid out in full through the scheme.