11 Dec 2010

Icelandic banking dispute settled

6:23 am on 11 December 2010

Iceland has reached a deal aimed at settling the Icesave banking dispute with Britain and the Netherlands.

The government has agreed to repay an estimated 4 billion euros (£3.4 billion; $US5.3 billion) that the British and Dutch governments spent reimbursing citizens who lost money in the collapse of Icesave.

Repayments will begin in 2016 and will be completed by 2046.

The BBC reports the terms of the agreement must now be approved by Iceland's parliament and president.

The UK Treasury welcomed the deal. Britain recently changed its stance over Iceland's wish to join the European Union and stopped opposing the plan.

Representatives of the three countries met in London to agree the final terms of a deal.

Negotiations over the repayments have been going on for the past two years, since Icesave's parent company, Landsbanki, collapsed at the end of 2008. Iceland consequently plunged into a deep recession.

Iceland will pay an interest rate on its outstanding debt of 3% to the Dutch and 3.3% to the UK from 2011.

The BBC reports the terms are better than a previous deal, subsequently voted down by Icelandic voters in a referendum in March, which included an interest rate of 5.5%.

In a statement, the Dutch finance ministry said the Netherlands will receive 1.3 billion euros.

The British government put more than £2 billion into the Financial Services Compensation Scheme to cover Icesave account holders.