Regulation  

Iceland court decision heralds ‘new era of risk’

The IFA for Cornwall-based Worldwide Financial Planning said this week’s European Free Trade Association decision - which ruled that Iceland would not have to repay the British and Dutch governments for compensation paid out to former Icesave customers - heralded a “new era of risk” for bank customers.

Mr McBreen said: “This could well set a precedent for other banks that may collapse. Historically, the belief has been that banks are safe.

“What was once a risk-free proposition has now gone and this decision by the EFTA means that we all need to be aware that any bank, in any country, could go pear shaped, with the risk of losing our money. Who will pay for the next collapse?”

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Last week, the European Central Bank announced that 278 banks have repaid some of the funds pumped in to help them through the crisis.

Some 245 - which the ECB did not name - did not, including many Spanish, Greek, Irish and Italian banks, with whom some UK investors may be saving, directly or through subsidiaries.

Landsbanki’s Icesave had more than 230,000 UK customers before the Icelandic banking systems collapse. Then chancellor Alistair Darling bailed out the customers to the full extent of their savings (some £3.5bn) when the Icelandic deposit guarantee scheme announced it had insufficient funds.

Iceland refused to pay the funds back to the UK and to the Netherlands, which carried out a similar bailout for its citizens. Iceland has now paid up to 90 per cent of the minimum compensation required by European rules for deposit compensation schemes.