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IceSave Bank Stops UK Customers Withdrawing Funds

Personal_Finance / Credit Crisis 2008 Oct 07, 2008 - 04:05 AM GMT

By: Nadeem_Walayat

Personal_Finance Best Financial Markets Analysis ArticleIceSave the UK arm of Icelandic bank Landsbanki has issued the statement on their website that they are currently suspending their UK banking operations which means UK customers CANNOT make withdrawals of some £4 billion saved with Icesave.


We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly.

The Icesave move follows yesterdays statement that it was business as normal, which clearly is no longer the case!

My recent analysis of 2nd October warned that small countries are at risk of going bankrupt during the credit crisis as they seek to expand their liabilities through bailouts, nationalisations and extension of guarantees, as yesterday mornings article Iceland Going Bankrupt?, highlighted the specific risks faced by Iceland that could be the first western european country to go bankrupt, near 24 hours before the mainstream press caught up to the magnitude of the unfolding events.

A countries bankruptcy would take the form of a collapsing currency and soaring inflation with citizens losing confidence in the currency and reverting to a barter system, as Germany witnessed during that of the 1920's Weimar republic period of hyper-inflation which destroyed wealth and economic activity. IN the current crisis, Iceland's currency is collapsing having fallen by more than 30% against the dollar in a month, and inflation is soaring with the most recent data giving an inflation rate of 14%.

The Prime Minster of Iceland, Geir Haarde, late last night addressed the nation and warned:

"In the perilous situation which exists now on the world's financial markets, providing the banks with a secure life line poses a great risk for the Icelandic nation," Haarde said in a televised address to the nation. "There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy."

Meanwhile the freeze on Icesave accounts is expected to be temporary, as the owners of Icesave have been nationalised by the Icelandic government, however as I mentioned in yesterdays article - "savers should at the first opportunity seek to repatriate their savings to a 100% UK bank as the consequences of a country going bankrupt could render guarantees meaningless".

Whilst in the UK, an early morning stock market rally has quickly reversed as the banking sector again crashed led by a 40% plunge in RBS shares following credit ratings agencies downgrades and news of a meeting between the government and the three big banks, Lloyds TSB, Barclays and RBS that failed to achieve the necessary recapitalisation rescue demands.

More recent analysis of the credit crisis.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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