TimesOnLine

Payouts for UK savers with Icesave started last week, and about 10,000 depositers have already received their money back.

The Financial Services Compensation Scheme (FSCS) says that the vast majority of UK customers with Icesave, the collapsed Icelandic bank, will recieve their money back within the next two weeks. The payout process is being done in phases, so some savers will receive their compensation before others.

About 240,000 UK Icesave customers have been unable to access their funds since the bank’s parent, Landsbanki, collapsed on October 8 and became nationalized. The FSCS is now contacting savers via email telling them how to claim back their money. An initial email explaining how the process works has already been sent to all customers, whilst a second email will invite depositors to log on to their existing Icesave accounts to receive their compensation.

The FSCS has been criticised for contacting savers by email, rather than by letter. Some depositors complained that their spam facility blocked the mail because it looked like a phishing attempt – where fraudsters try to steal financial information using bogus emails.

However, the compensation process has still been a lot simpler than many savers feared. The Icelandic government, which has not paid out any compensation to UK savers so far, is supposed to guarantee about the first £18,000, whilst the FSCS guarantees the next £32,000.

However, in this instance, Chancellor Alistair Darling promised that UK savers would get all of their money back, with the Treasury providing the FSCS with £800 million to fund the compensation of deposits over £50,000. The payout means savers will not have to apply to the Icelandic deposit guarantee scheme.

Loretta Minghella of the FSCS said: “Five weeks ago a lot of Icesave savers were worried that they were going to be left high and dry. Now they can be confident that the electronic process is underway and people are getting their money back. We have already transmitted about £0.25 billion after starting the process last weekend.

'We ask that people wait for their second email before attempting to log on to complete the process, and thank everyone for their patience.'

The FSCS has already stepped in to help more than 2.7 million UK savers following the problems at Heritable and Kaupthing Singer and Friedlander, two more collapsed Icelandic banks, and Bradford and Bingley. It is now processing compensation applications from customers of Heritable and Kaupthing Singer and Friedlander whose accounts did not transfer to ING Direct.

Last night the Icelandic government said it would meet its obligation to refund UK savers, after the Netherlands, Germany and Britain demanded that a $2 billion loan from the International Monetary Fund, needed to shore up Iceland’s battered economy, should only be given to Iceland on the condition that it offered some financial guarantees to foreign depositors.