Icelandic authorities have agreed to reimburse Britain and the Netherlands for compensation they have paid out to British and Dutch depositors in Icesave accounts of the failed Landsbanki bank, the governments said in a joint statement over the weekend.
The signed agreements with the Iceland Compensation Scheme will see payments made over 15 years, with an initial 7-year “grace period”.
A UK Treasury spokesman said the agreement was "a positive step forward for relations between our countries". Diplomatic relations between Britain and Iceland became strained last October when the British government used anti-terror legislation to seize Icelandic assets.
About 300,000 British savers were affected by the collapse of Landsbanki.
Iceland responded by threatening to sue the British government. “Today's announcement is a positive step forward for relations between our countries," the Treasury spokesman said in a statement.
“It will ensure the taxpayers interests are protected and that the Icelandic economy can continue in its recovery after very difficult times.”
The Treasury said it proposes to lift the asset freezing order from June 15th. Under the deal, the £2.3 billion paid out by the British government will be treated as a loan to the scheme.
During the first 7 years interest will be capitalised.
Interest and principal amounts will then be payable quarterly over the next 8 years. During this period the loan will be guaranteed by the Iceland government, which also signed the agreement.
The bulk of the cost will be met from Landsbanki assets, the statement said.
Landsbanki collapsed along with its main Icelandic peers last October after the global financial crisis left them starved of the easy credit necessary to service billions of dollars of debt accumulated over years of rapid overseas expansion.
Hundreds of thousands of savers, who had been attracted by the high interest rates, were affected across Europe.
Reuters