The UK government stepped in to bail out depositors who lost out when the banks collapsed in 2008.
The Icelandic deposit protection scheme gave compensation of up to around £16,300.
For savers with more, the UK’s Financial Services Compensation Scheme (FSCS) topped that up to a limit of £50,000.
And to avoid spreading panic, the government guaranteed 100 per cent of all savings on top of the £50,000 limit.
For Icesave alone the payouts cost the government £3.5bn, and protected 230,000 savers.
Five years on the FSCS has recovered some of the money from the estates of Icesave, Heritable, a subsidiary of Landsbanki, and Kaupthing Singer and Friedlander, a subsidiary of Kaupthing Bank.
Britain’s banks are paying just over £1bn to meet the £50,000 guarantee level, their obligations under the FSCS.
That will be split over three instalments of £363m over three years.
Although the government and FSCS are left with a bill of around £500m, they hope to regain more money from the bust Icelandic lenders by 2016 as the process of unwinding continues.
“These payments show that the system works, and we hope it gives confidence to consumers that if there is ever another bank failure that their savings will be protected,” said Anthony Browne, chief of the British Bankers’ Authority.
All British banks and building societies who sign up to the FSCS will pay compensation, but the majority will come from the big four banks. The exact level each owes is based on the size of their own balance sheets.