Brits covered by UK pledge over Iceland deposits

Two of Iceland's biggest banks have hundreds of thousands of customers in the UK after launching aggressive moves into the British savings market in recent years.
Both Landsbanki, through its Icesave accounts, and Kaupthing, through Kaupthing Edge, have won a significant share of the UK savings market by offering interest rates that have consistently topped best-buy tables. While savers with both banks are covered by the £50,000 guarantee which takes effect for British depositors today, the pledge works in different ways. Kaupthing is a full member of the Fin-ancial Services Compensation Scheme (FSCS), so in the event of any problem at the bank, account holders would apply to the FSCS direct for compensation.
Icesave, however, operates in the UK via the passport scheme that protects customers of banks in the European Economic Area (EEA). This means savers would have to apply to the Icelandic equivalent of the FSCS for redress, before turning to the FSCS to make good any shortfall.
In both cases, savers would be protected up to the £50,000 limit, but Icesave customers would find the process of claiming compensation more bureaucratic. The EEA passport agreement says savers must receive their compensation within three months of losing out, though the FSCS has promised to make good losses much more speedily.
A spokesman for Icesave declined to comment yesterday on customers' behaviour in recent weeks. A spokeswoman for Kaupthing said: "These are clearly highly unusual times in the financial markets – one of the things we are seeing in our own business is that UK savers are increasingly aware of the UK FSCS scheme and invest accordingly. Although we have seen some clients move funds out of Kaupthing Edge to leave their remaining balance at UK FSCS protection levels or less, to put this in context we have opened far more accounts than have been closed."