UK threatens legal action over Icesave as ING Direct acquires Kaupthing deposits

UK threatens legal action over Icesave as ING Direct acquires Kaupthing deposits

ING Direct - the Web and telephone banking business of Dutch group ING - is acquiring £2.5 billion worth of retail deposits held by UK customers of Kaupthing Edge, the Internet-only arm of the Icelandic bank, under a deal backed by the UK Treasury.

ING Direct is taking on the 160,000 British customers of Kaupthing Edge, an Internet savings service that launched in the UK earlier this year.

Also under a deal agreed with the UK Treasury, ING Direct is taking control of £538 million of deposits held by British customers of Landsbanki-subsidiary Heritable Bank. Landsbanki went into receivership earlier this week.

The Treasury says both the Kaupthing Edge and Heritable Bank deposit businesses have been transferred to ING Direct, which is "working to rapidly ensure that it is business as normal for all customers".

Commenting on the move, Johan de Wit, ING Direct's UK CEO, says: "ING Direct is in a position of strength. We are very pleased to have been able to take such rapid and decisive action that has provided Heritable Bank's customers, and those of Kaupthing Edge, with the reassurances they need."

Landsbanki is also the the parent company of Icesave, which suspended all deposits and withdrawals from online accounts just before its parent company was taken under government control yesterday.

The UK Treasury says that arrangements have been put in place "to ensure that no retail depositor will lose any money as a result of the closure of Icesave".

Chancellor of the exchequer Alastair Darling has pledged to guarantee all deposits made by the 300,000 Icesave customers in the UK - including those exceeding the £50,000 limit of the UK's financial compensation scheme.

Darling told BBC reporters that the Icelandic government had informed him that "they have no intention of honouring their obligations here".

"Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn't got any money in it," he told the BBC.

"The British scheme would top that up to £50,000, but people over and above that would lose out," he added. "I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back."

In a further move, prime minister Gordon Brown told reporters at a press conference that the UK was taking legal action against the Icelandic authorities "to recover the money lost to people who deposited in UK branches of its banks".

Extra help for Icesave customers - BBC

UK to sue Iceland over any lost bank savings - The Guardian

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Siddharth Udani

Siddharth Udani