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The Icesave dispute was a diplomatic dispute that began after the privately owned Icelandic bank Landsbanki was placed in receivership on 7 October 2008. The Icelandic state refused to take on this liability on behalf of the guarantee fund. Originally this was because the state lost funding access at credit markets due to the Icelandic financial crisis, but later proposed bilateral loan guarantees for repayment were rejected by Icelandic voters. The Icesave bill 1 was the first negotiated loan agreement, attempting to define the repayment terms for these two loans. It was enacted on 2 September 2009 but was not accepted by the governments of UK and Netherlands, due to a unilaterally attached term added by the Icelandic parliament which limited Iceland’s repayment guarantee only to 2024, with automatic cancellation of any potential owing still existing beyond this year. After the rejection of Icesave bill 2, renewed negotiations started on the terms for the repayment agreement. The negotiations resulted, in December 2010, in an adjusted agreement named Icesave bill 3, with better terms for Iceland.
Icesave was an online savings account brand owned and operated by the private Landsbanki bank from 2006 to 2008 that offered savings accounts. The bank intended to roll the brand out to additional territories in 2008 and 2009. It offered a single type of account: an immediate-access savings account which initially offered 5 per cent interest, later increased to 5. Icesave accounts were accounts with Landsbanki’s branches in London and Amsterdam, as the logo used in the United Kingdom made clear: “Icesave, part of Landsbanki, Reykjavik, Iceland.
As Icesave was marketed as part of Landsbanki, the later complaints of the United Kingdom and Netherlands related to different treatment of Icelandic Landsbanki accounts and Icesave accounts. Kaupthing Edge was an online savings brand owned and operated by Kaupthing Bank and its subsidiaries from 2007 to 2008. It offered savings accounts only to personal savers and operated in ten countries. Germany, from March 2008, attracting about 30,000 depositors. In Finland and Norway, the local financial supervisors took over Kaupthing’s operations and guaranteed deposits. In Austria, a private agreement was reached between the Austrian authorities and Kaupthing’s receivers, with accounts being transferred to other banks. On 6 October, the Icelandic government pushed an emergency law through Iceland’s parliament, the Althing, in response to the “unusual financial market circumstances”.
In a separate measure, the government also guaranteed “that deposits in domestic commercial and savings banks and their branches in Iceland will be fully covered. The FME placed Landsbanki in receivership early on 7 October. A press release from the FME stated that all of Landsbanki’s Icelandic branches, call centres, ATMs and internet operations will be open for business as usual, and that all “domestic deposits” were fully guaranteed. Two days later, on 9 October, the Icelandic assets and liabilities of Landsbanki were transferred to a new government-owned bank, Nýi Landsbanki.