I just heard about this situation with Icesave (Landsbanki) UK accounts. Have made withdrawals taking my balance down to the minimum £250 up to 8am this morning. Tried again just now as a test and got this message:
We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly.
UK savers' Icesave accounts frozen as Landsbanki rescued by state
This is Money
7 October 2008, 10:50am
Internet bank Icesave today stopped savers withdrawing their cash after its parent company was nationalised by the Icelandic government.
The Icelandic Financial Supervisory Authority issued a statement saying the country's government had taken control of Landsbanki.
It sought to reassure domestic savers that their money was fully guaranteed by the government, adding that domestic branches, call centres, cash machines and internet operations would be 'open for business as usual'.
But the guarantee does not extent to UK savers and people logging on to Icesave's website were greeted with a message telling them that the group was not currently processing any deposits or any withdrawal requests on its internet accounts.
The nationalisation of Landsbanki is the latest twist in the financial turmoil which is sweeping the world. Fears over the health of Icelandic banks had been growing in recent weeks as the country wrestled to maintain stability in its financial sector.
Iceland's prime minister Geir Haarde warned yesterday that the island faced the 'real possibility' of 'national bankruptcy', as its economy could be sucked into the 'global banking swell'.
His comments came as the country's parliament passed emergency legislation yesterday in an attempt to restore stability to its banking system, while trading in the country's six biggest financial institutions was temporarily halted.
Under the legislation, Iceland's financial regulator will have the power to dictate banks' operations, including forcing them to sell overseas assets or merge with rivals.
The Icelandic Financial Supervisory Authority said in its statement that the nationalisation of Landsbanki was 'a necessary first step in achieving the objectives of the Icelandic government and parliament to ensure the continued orderly operation of domestic banking and the safety of domestic deposits'.
It is not known how many UK consumers hold money with Icesave, but it is thought that as many as 300,000 people in this country have savings with an Icelandic institution. Money is mainly held with Icesave and Kaupthing Edge, the UK retail arm of Iceland's biggest bank Kaupthing.
If an Icelandic bank failed, savers would still have the first £16,170 of their money protected under the Icelandic savers compensation scheme, with the sum topped up to £50,000 for individuals, or £100,000 for joint account customers, by the Financial Services Compensation Scheme (FSCS).
Iceland savings guarantee freezes out UK savers
Edward Heathcoat Amory & James Coney, Daily Mail
7 October 2008, 8:14am
More than 200,000 British savers with the internet bank Icesave were last night shut out from a guarantee to protect 100% of their deposits.
In a short statement, the Icelandic government said it would fully guarantee deposits in domestic banks.
But heads of Landsbanki, which runs Icesave, admitted that its UK-based savers would not get the same protection for their £4.5bn investments should it go bust.
Instead, from today their savings are protected to a maximum of £50,000 per head, the same as customers of UK banks.
Of this, they would have to claim the first £16,000 from the Icelandic government, with the UK compensation scheme topping up the rest. Even so, there are concerns that the tiny Icelandic economy would never be able to refund such huge sums.
The move from the Reykjavik government followed a day of frantic activity which saw financial shares in the country suspended and the currency plummet by a third.
Worried British customers of Icesave were unable to access their accounts after its website crashed. Some were informed they faced a wait of 'several hours' before they could access their money. Those ringing its phonelines were told that the bank was receiving ' unprecedented call volumes'.
The internet bank insists it has ample reserves to pay back UK customers. However, it admitted savers had been reducing their balances to the compensation level.
Despite its tiny size - population only 315,000, less than Leeds - Iceland's difficulties have a huge significance here in Britain. If it suffers a catastrophic financial collapse then it will send shock waves through the British high street.
Ten of thousands of UK jobs, and numerous British businesses, could become innocent victims of this Nordic disaster. Iceland is in trouble because its banks have borrowed too much money and invested it abroad, and the principal destination for that money was Britain.
One group, Baugur, controls a substantial chunk of the British high street, backing firms which employ 55,000 people and have £5bn of sales. It owns or has stakes in companies as diverse as the food retailer Iceland, jeweller Goldsmiths, House of Fraser department stores and Hamleys the toy shop.
Their future today is uncertain as, despite protestations to the contrary, it is hard to see their present owners being able to hang on to them if there is a complete collapse at home. Iceland's current problems have their roots more than ten years ago when a conservative government privatised and deregulated the banking industry at the same time when huge amounts of foreign money began to flood into Iceland.
No one is quite certain where it all came from - most of it was via anonymous tax havens such as the Cayman Islands - but in part it was driven by investors hungry for high interest rates. Banks took the money and went on a spending spree. Either directly, or by loaning the cash to Icelandic entrepreneurs, they rushed around Europe buying up companies.