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TOPICAL DEBATES Financial Stability

As my right hon. Friend the Chancellor made clear, all the deposits by retail savers will be protected. Yesterday, the FSA deemed Icesave to be in default. Because of the Chancellor's decision, no retail depositor will lose any money as a result of the closure of Icesave. The Treasury and the financial services compensation scheme are working with the Icelandic authorities and their deposit insurance scheme to ensure that depositors are paid back as quickly as possible. My right hon. Friend the Chancellor emphasised to the Icelandic Finance Minister that UK depositors in Icesave should have the same protections as depositors in Iceland, and receive their deposits back in full promptly. Arrangements are being put in place to ensure that all ISA customers of Icesave will continue to benefit from the tax-free status of their accounts. To protect UK economic interests, the Government have frozen the funds and financial assets held by the Icelandic bank, Landsbanki. We fully understand the exceptionally difficult challenges faced by the Icelandic Government and the pressure that they are under. We want to work co-operatively and constructively with them, particularly to ensure that depositors and creditors are protected. We have, though, been unable to obtain complete clarity from Iceland on the position, so the freeze we introduced is a precautionary measure protecting UK interests, and it could be lifted once safeguards are in place to prevent action detrimental to the UK economy.