Iceland’s Deposits Still Interest Free in Bank of England Skip to content

Iceland’s Deposits Still Interest Free in Bank of England

A large part of the down payments of loans which Landsbanki granted companies and individuals in the UK are still being deposited into an interest-free account at the Bank of England. This arrangement was first reported in April last year.

Copyright: Icelandic Photo Agency.

According to Morgunbladid’s sources, the total amount of these down payments is approaching ISK 200 billion (USD 1.6 billion, EUR 1.1 billion)—they have been deposited to the Bank of England account since the assets of Landsbanki in the UK were frozen in the fall of 2008.

Last June, the freezing order was lifted, yet the deposits cannot be relocated because, according to British regulations, money owned by bankrupt estates in the UK cannot be transferred out of the country.

The Icelandic Ministry of Finance said it has been discussed with British authorities to relocate these down payments to an account with interest but no decision has been made.

Morgunbladid pointed out that while these deposits, which are owned by Landsbanki and thus the Icelandic state, have no yield, British and Dutch authorities are offering the Icelandic state a loan to cover Landsbanki’s Icesave deposits on 5.5 percent interest.

Fréttabladid reported in April that Landsbanki’s account in the Bank of England would remain there until the Icesave dispute has been resolved.

The resolution committee of Landsbanki made an agreement with the Bank of England after Landsbanki’s collapse to protect its loans and assets in the UK.

When asked why the down payments of Landsbanki’s loans are being deposited to an interest-free account at the Bank of England, a spokesperson for the resolution committee stated that they had only trusted the Bank of England to store the loan down payments and that the bank had not offered any interest rates.

Click here to read more about Icesave.

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