Government accused of complacency over Icelandic bank collapse

The Government has been accused of being complacent in the run up to the collapse of Icelandic banks, after it emerged that ministers had received warnings over the possible collapse of the bank in around July. However, they had failed to take action and soon after the Icelandic banks, as predicted, did indeed collapse.

According to reports to warnings were issued by Lib Dem peer Lord Oakeshott and Tory MP Michael Fallon, who both raised their concerns with government ministers. Lord Oakeshott stated: “Alarm bells were ringing all over about the Icelandic banks and the Treasury must have been blind and deaf not to hear them.”

An official from the Treasury said: “As the minister made clear at the time, the Icelandic authorities have a legal obligation to pay out depositors under their existing compensation scheme and we expect them to honour this commitment.” He added: “This is part of the action the Treasury is taking action to ensure the interests of all retail depositors are safeguarded and that legal obligations to UK creditors are honoured.”

The UK government has had to guarantee 100% of UK savers’ deposits with the Icelandic banks after the Icelandic government failed to honour its obligation to cover the deposits. Many charities and local authorities also had money invested in the Icelandic banks.