The European Free Trade Association (EFTA) yesterday sent a letter outlining its decision that Iceland is legally bound to insure the minimum deposit guarantee to British and Dutch Icesave account holders. The guarantee is part of Iceland’s EEA (European Economic Area) membership agreement.

The minimum depositors’ guarantee is EUR 20,000 per saver in the failed Icesave internet savings accounts which were run as a branch of Landsbanki before it collapsed in autumn 2008. The EFTA report states that the UK and the Netherlands have reimbursed their own savers and that Iceland’s severe recession does not diminish the country’s obligation to pay the two governments back.

The Icelandic government had insisted in a letter to the EFTA that the existence of a depositors’ guarantee fund in the country was enough to fulfil the requirements of the EU directive on cross border banking and also that the rules do not fully apply in the case of the collapse of an entire national banking system (as happened in Iceland). The EFTA disagrees with this reading of European law.  27-May-10.

http://www.icenews.is/index.php/2010/05/27/efta-iceland-must-pay-icesave/