Final payout from Icelandic banks falls short

Madeline Ratcliffe
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THE British and Dutch governments stand to lose as much as 533bn krona (£2.7bn) in a final deal with Icelandic banks, after they were forced to step in and reimburse investors in 2008.

In a settlement with Iceland’s Depositors and Investors Guarantee Fund (TIF), British and Dutch authorities will receive 20bn Icelandic krona (£100m), which equates to around two per cent of their 553bn krona claim following the collapse of Icelandic bank Landsbanki, parent of Icesave in 2008.

Iceland refused to underwrite the losses of British and Dutch investors, forcing their respective governments to cover the losses.

This prompted then Prime Minister Gordon Brown to use anti-terrorism legislation to freeze Lansbanki’s UK assets.

A protracted dispute saw the matter referred to the International Monetary Fund and saw two referendums held in Iceland on the issue.

After years of legal wrangling there was a victory for Iceland in 2013 when the European Free Trade Association court ruled that Iceland did not break European free trade laws by refusing to compensate foreign depositors.

Although 85 per cent of the original £4.5bn was recovered from the Icelandic authorities or the Landsbanki estate, in 2013 the UK and the Netherlands sued Iceland for a further 553bn krona they claimed was outstanding. Britain’s claims accounted for 81 per cent of the total.

Charities and local government associations were some of the biggest losers when Icesave went bankrupt.

More than 100 public bodies, such as Transport for London, lost money invested in Icelandic banks, including £798.95m from local councils around the UK.

Iceland finally returned to growth in 2011 boosted by tourism and exports.