19 Oct 2009

Iceland to pay back $6b lent when bank collapsed

3:50 pm on 19 October 2009

Iceland has agreed to repay Britain and the Netherlands more than $6 billion - the amount the two governments lent to compensate savers who lost money when the Icesave bank collapsed last year.

About 400,000 savers lost money when Icesave owner Landsbanki collapsed because of the global recession. The Icelandic government eventually had to take over not only Landsbanki but the country's two other biggest banks, Glitnir and Kaupthing.

A bill authorising repayment to the British and Dutch governments goes before Iceland's parliament this week, following objections by the UK and the Netherlands to legislation passed in August.

Icelandic prime minister Johanna Sigurdardottir says that the government believes the new law will be adopted by Parliament, allowing staged repayments to start in 2016.

The repayment process, if approved, will be linked to Iceland's recovery from the economic crisis. Ms Sigudardottir told a news conference that a review by the IMF of the country's $20b bailout programme would take place before the end of October.

Iceland hopes that the repayment deal will help it to get more financial aid.