Landsbanki Íslands hf. operated branches in Britain and in the Netherlands, and invited customers to open deposit accounts under the name ‘Icesave’. Payments were made into the Guarantee Fund in Iceland, the bank’s home state, in respect of these accounts.

When, in October 2008, the Icelandic banking system collapsed, Landsbanki Íslands hf. was unable to pay Icesave account holders back their deposits. The British Government subsequently decided to recompense ordinary customers of the bank in full for their losses; in the Netherlands, they received recompense up to a certain sum over and above the deposit guarantee amount. The British and Dutch governments then demanded that the Icelandic government repay the minimum deposit guarantees. It is this repayment that is the subject of the Icesave Agreements.

Broadly, the Guarantee Fund is obliged, under the agreements, to repay the British and Dutch governments the costs they incurred by paying the minimum deposit guarantee to the holders of deposits in Landsbanki in the United Kingdom and the Netherlands.

The Guarantee Fund’s reserves suffice for only a small part of the deposit guarantees corresponding to the Icesave accounts.

Landsbanki Íslands hf. is currently undergoing winding-up proceedings. Work is in progress on calling in claims and selling the bank’s assets. In the course of time, money from the bank will be used towards paying its debts in a particular order. Deposit guarantees rank as priority claims. On the other hand, it is not certain what proportion of debts will be recovered and when this money will be available. It is expected to take some time to call in the claims and sell the assets; it is estimated that this process will be completed for the most part in 2016.

Under the Icesave Agreements, the Icelandic State undertakes to guarantee repayment of the outstanding balance of the Guarantee Fund’s obligations and interest payments on the principal of the claim.