ING acquires Icelandic saving accounts
Savings bank ING Direct is to buy more than £3 billion of British cash deposits held in Icelandic-owned banks Heritable Bank and Kaupthing Edge.
The Dutch-owned savings bank says it will acquire 160,000 saving accounts from Kaupthing Edge and 22,200 from Heritable.
Heritable Bank, the mortgage and savings bank owned by Landsbanki, has now been closed by the Financial Services Authority (FSA). The watchdog says the bank can no longer continue to operate under it rules and has therefore placed it in default. Like savings bank Icesave, Heritable is owned by the now-nationalised Icelandic bank Landsbanki.
The British government has promised to protect 100% of deposits in both Icesave and Heritable. It is also protecting 100% of Kaupthing Edge deposits.
A statement from the Treasury reads: "Kaupthing Edge deposit business has been transferred to ING Direct, a wholly-owned subsidiary of ING Group, which operates through its branch in the UK. ING Direct is working to rapidly ensure that it is business as normal for all customers."
The chancellor Alistair Darling has also said that this action has been taken to ensure the stability of the UK financial system and to ensure savers’ money is “safe and secure”.
The UK government says it expects Landsbanki to soon be declared in default. However, it says arrangements are ready so that “no retail depositor will lose any money” as a result.
In a statement it says: “The Treasury and the Financial Services Compensation Scheme (FSCS) are working with the Icelandic authorities and its deposit insurance scheme to ensure that depositors are paid back as quickly as possible.
“The chancellor has also spoken to the Icelandic finance minister about the importance of the Icelandic authorities ensuring that UK depositors in Icesave are given the same protections as depositors in Iceland and receive their deposits back in full promptly.”
All ISA customers of Icesave will also continue to “benefit from the tax-free status of their accounts” it adds.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).