Warning about Iceland banks was ignored by UK

According to a recent report warnings that were issued about Icelandic banks were ignored by the UK government, resulting in officials being accused of complacency. It is alleges that warnings over the possible collapse of Icelandic banks were given as far back as July, but the government paid no heed to these warnings. The issue was raised with government ministers on two separate occasions according to reports, and this was by Lib Dem peer Lord Oakeshott and Tory MP Michael Fallon.

When bringing up the issues with ministers the two officials were assured that all UK consumer savings with the Icelandic banks would be protected. The ministers said that Iceland had an obligation to protect consumers’ savings, and added that it was not the place of the government to advise savers on where they should put their cash.

According to Lord Oakeshott: “Alarm bells were ringing all over about the Icelandic banks and the Treasury must have been blind and deaf not to hear them.”

An official from the Treasury, however, said: “As the minister made clear at the time, the Icelandic authorities have a legal obligation to pay out depositors under their existing compensation scheme and we expect them to honour this commitment.”

He added: “This is part of the action the Treasury is taking action to ensure the interests of all retail depositors are safeguarded and that legal obligations to UK creditors are honoured.”

Following the collapse of the Icelandic banks the Icelandic government has failed to honour its compensation obligations with regards to the savings deposited in the banks, and the UK government has had to provide a 100% guarantee on the savings of UK consumers who lost their savings as a result of the collapse.