Landsbanki's UK bank icesave suspends operations

LONDON (Reuters) - Icelandic bank Landsbanki’s British internet bank icesave has stopped customers withdrawing or depositing money, according to its website.

“We are not currently processing any deposits or any withdrawal requests through our icesave internet accounts,” icesave said on Tuesday. “We apologize for any inconvenience this may cause our customers. We hope to provide you with more information shortly.”

The Icelandic Financial Supervisory Authority earlier said it would take control of Landsbanki, the country’s second largest bank by value.

A spokeswoman for the UK’s Financial Services Authority said the Icelandic authorities were responsible for regulating icesave, legally part of the UK branch of Landsbanki, and they were responsible for determining its solvency.

If icesave were declared insolvent, its customers would be eligible for refunds up to the UK ceiling of 50,000 pounds per person, she added.

Iceland’s depositor protection program would be responsible for paying the first 20,000 euros, with the UK’s Financial Services Compensation Scheme contributing the balance, she said.

“The Icelandic authorities have taken Landsbanki, icesave’s parent bank, into public ownership. The FSA is seeking further clarity from the Icelandic regulator about what this means for the UK branch of Landsbanki, which includes the icesave operation,” the FSA said in a statement on its Web site.

The IFSA’s move was the latest step by Icelandic authorities to control a financial sector crisis that has already led to the part-nationalization of the country’s number-three bank Glitnir

and new legislation to give the government sweeping powers over the banking sector.

In the Netherlands, where Landsbanki opened online savings bank four months ago, customers reported problems accessing their accounts.

“I managed to transfer money to my old ABN AMRO account and it worked,” said one icesave customer in the Netherlands, who did want his name used but added that he withdrew 17,620.15 euros. “My friends are calling me now and say they can’t access the website.”

Icesave in the Netherlands attracted customers with an online savings rate of 5 percent, which was later raised to 5.25 percent. Most other rates offers in the Netherlands were at around 4 percent. amassed more than 25,000 customers in its first month, and now has over 50,000.

The maximum deposit guarantee in the Netherlands is 40,000 euros, with any amount over 20,000 subject to a 10 percent account holder risk.

Reporting by Dan Lalor; additional reporting by Myles Neligan in London and Harro ten Wolde in Amsterdam; Editing by Paul Bolding