Iceland Banking Crisis: Landsbanki to Get £100m Loan from Bank of England

by Christina 123 | October 13, 2008 at 12:33 pm

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Chancellor Alastair Darling has today approved a £100m loan package from the Bank of England to the Icelandic bank Landsbanki in an attempt to help the struggling bank honour its commitment to offer prompt compensation to Icesaver customers in the UK.

The loan, announced to parliament by Alistair Darling, Chancellor of the Exchequer, marks the beginning of the end of the fierce diplomatic spat with Iceland, the worst clash since the so-called Cod War of the 1970s. The anger of British Icesave depositors - fearing that they would be excluded from Icelandic compensation - stoked the conflict. Britain infuriated Iceland by using anti-terrorist legislation to seize the four billion pounds sterling of UK assets held by Landsbanki.

“The Bank of England is today providing a short-term secured loan of up to £100 million to Landsbanki, to help maximise the returns to UK creditors,” said Mr Darling.

The Icelanders were enthusiastic - they have been waiting for a sign of international confidence since the crisis began. The Reykjavik stock exchange has been closed since Thursday because of fears that the whole financial edifice could collapse. “This is a very encouraging step, “said a government source in Reykjavik.