BREAKING NEWS

Negotiators agree deal on failed Iceland bank

By ASSOCIATED PRESS

DECEMBER 10, 2010 06:30

REYKJAVIK, Iceland — Iceland, Britain and The Netherlands have reached a deal that will see Iceland repay $5 billion in debt stemming from the 2008 collapse of the Internet bank Icesave, negotiators announced Thursday.

Thousands of British and Dutch nationals had savings in the bank, which offered high interest rates as Iceland boomed, and collapsed when the island nation's financial sector imploded two years ago.

The Netherlands and Britain reimbursed their citizens' deposits in Icesave upfront after the bank collapsed. Both countries have been seeking reimbursement, but Icelanders rejected an earlier deal to repay the money and the affair has chilled relations among the countries.

The new agreement will see Iceland start repayments in 2016 and finish by 2046, at an interest rate of 3 percent to the Dutch and 3.3 percent to Britain.

An earlier Icesave agreement with a 5.5 percent interest rate was approved by Iceland's parliament, but vetoed by the president and subsequently rejected in a national referendum.

Britain has been seeking 2.3 billion pounds ($3.6 billion) in compensation and The Netherlands €1.3 billion ($1.7 billion)

Under the terms of the new agreement, the cost to the Icelandic treasury is estimated not to exceed 50 billion Icelandic kronur ($435 million). The recovered assets of Landsbanki are expected to cover the majority of the debt.

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