Darling Vows to Help Icesave Savers

The chancellor, Alistair Darling, today promised government help for UK savers with Icelandic internet bank Icesave.

An estimated 300,000 depositors are facing an anxious wait for news after the internet bank's parent company Landsbanki was nationalised by the Icelandic government.

Darling told the BBC this morning that the Icelandic government had decided not to honor its obligation to savers in the UK to protect up to €20,000 (£16,000) of deposits.

"The Icelandic government, believe it or not, have told me yesterday they have no intention of honoring their obligations here," he said.

"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."

Darling said the Treasury would "pursue" Iceland "vigorously" to get the money back.

"But in the meantime I am going to be able to help those savers who would otherwise have to look to Iceland to get their money back. I am prepared to stand behind them and to stand behind the depositors.

"It demonstrates my commitment to help people who have put money into banks in these exceptional circumstances."

Under the UK compensation scheme savers have the first £50,000 of their money protected, but the rules are slightly different when an overseas bank is involved.

In the case of Icesave, the Financial Services Compensation Scheme (FSCS) had said it was only obliged to make top-up payments above the €20,887 Icelandic protection limit.

However, the chancellor said he would announce measures in the Commons later today to help British savers.

Customers with Icesave first learnt there was something amiss when the group stopped people withdrawing money from their internet accounts after Landsbanki was placed into receivership yesterday morning.

A statement on Icesave's website said: "We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts."

Landsbanki's other UK business, Heritable Bank, has also stopped taking deposits or allowing consumer to make withdrawals and is no longer offering mortgages.