U.K. and Icelandic Regulators Stand Ready to Protect Depositors as Financial Concerns Heighten

The sharp tone between Britain and Iceland in regards to U.K. deposits in Icelandic banks have hardened. After the U.K. used anti-terrorist laws to seize assets of Icelandic banks in the U.K. in order to protect depositors, rhetorics between the two governments have toughened. The U.K. Treasury has assured the public that all retail deposits in Icelandic banks are safe. (Accounts in Kaupthing Singer & Friedlander and Heritable have already been transferred to ING Direct, while U.K. authorities are in negotiations with Icelandic regulators about protecting U.K. savers with deposits at Icesave, a U.K.-based subsidiary of Landsbanki not covered by the FSCS). However, over 100 local U.K. authorities have around GBP 0.8 bln in deposits in Iceland, money not covered by the FSCS. Last night, PM Brown threatened "take further action" against the Icelandic authorities, including freezing assets in Icelandic companies in the U.K., should the money not be returned. U.K.'s Chancellor Darling and his Icelandic counterpart are to meet at an IMF meeting this weekend to discuss the matter.