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UK to sue Iceland over internet bank collapse

The UK government is apparently going to take legal action against the Icelandic government over the collapse of the UK internet bank Icesave, which was of course part of the Icelandic bank Landsbanki (dead as of Tuesday). The UK government has also sworn to protect UK savers in Icebank, who currently have their savings frozen.
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Written by David Meyer, Freelance reporter on

The UK government is apparently going to take legal action against the Icelandic government over the collapse of the UK internet bank Icesave, which was of course part of the Icelandic bank Landsbanki (dead as of Tuesday). The UK government has also sworn to protect UK savers in Icebank, who currently have their savings frozen.

I'm still trying to get my head around the implications of this story for the internet banking industry in general. The first lesson, I would imagine, is to always check the provenance of the bank, which is less obvious than with high street banks because... well... it's not on the high street.

Mind you, who even one week ago would have predicted Landsbanki would be taken over by the Icelandic government and declared insolvent? For those 300,000 British savers plowing their hard-earned cash into Icesave, it must have looked like a reasonable operation, as it no doubt was at the time.

So what is the lesson here? Well, it seems the regulation of such a bank, a purely online facet of a foreign bank, is not as clear-cut as it is for a purely UK-based operation - otherwise the compensation situation wouldn't be such a nightmare. Of course, nobody is going to get the full picture until this awful moment has passed, but there are clearly going to be implications for much of the internet banking industry as we currently know it.

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