Icelandic Banks No UK Compensation

Icelandic Banks No UK Compensation.

The European Court has ruled in favour of the Icelandic Government rather than the UK and Dutch in the battle over investor compensation following the collapse of Icelandic Banks: Icesave, run by the Icelandic Landsbanki and Kaupthing Singer Friedlander.

In simple terms, the banks collapsed on 2008 and as all these banks had registered under for a UK Banking Licence, it was the UK Financial Services Compensation Scheme that picked up the bill.

Investors were protected in the UK up to £50,000 each at the time and very quickly received their money back in a matter of weeks.  Icelandic compensation scheme was responsible for the first 20,887 euros (£16,300) and the UK picked up the balance.

There has been much debate and speculation about fault and knowledge and why millions allegedly flowed out of UK and Isle of Man branches and back into Iceland branches in the run up to the collapse.

Our view
Ethically, this is clearly not great.  The Icelandic Governments argument that just because the UK had higher compensation limits than the rest of Europe at the time, why should they pay and we have to agree.  Iceland complied with EU laws at the time so why should they pay more just because the UK had higher limits.  

If the UK regulator is foolish enough to grant a banking licence and FSA approval to an ‘at risk’ banks.
In addition, Iceland itself should of course look long and hard at the run up to the collapse and how it regulated such high consumer detriment risk banks.