Landsbanki Freezing Order 2008

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Mr. Hoban: What assessment have the Government made of the exposure of the Treasury and the FSCS as a consequence of the situation?
Ian Pearson: We do not have as much information as we would like about the progress of the administration in Iceland, so it is not possible to give the hon. Gentleman direct figures for that matter at this time. We are still working and making contact with administrators, and, as I indicated, officials from the Treasury were in Iceland last week for further discussions with the Icelandic authorities.
Mr. Hoban: What conditions need to be triggered for the amounts that have been frozen to be released?
Ian Pearson: We need to be confident that UK creditors will be treated fairly in the administration process. We still do not have confirmation that that is the case. It has been reported in the media that one way in which the Government will ensure speedy payout is by providing a loan to the Icelandic authorities so that they can pay the first tranche to which I referred. However, we will need assurances that UK creditors will be treated fairly in the administration before we take action with regard to the freezing order. We will review it regularly, and the order will remain in force only for as long as we think it is necessary.
Mr. Hoban: The Minister is saying that the Treasury could make a loan available to the Icelandic authorities to cover the first £2.2 billion, the amount that would be due to people holding accounts of £16,000 or less, to enable that sum to be paid. Is that correct?
Ian Pearson: Yes, that is our intention, but we would need to have assurances that that money will be repaid.
Barry Gardiner: Is it my hon. Friend’s understanding that the liquidators could have any legal standing other than to treat UK creditors equally in the winding up of the company?
Ian Pearson: I am not a lawyer, as my hon. Friend knows, but it is certainly the case that the liquidator should act in accordance with the law, and one of the basic tenets of law is that all creditors should be treated fairly. It is true that the legislation proposed in Iceland caused serious doubt about whether the law would be followed there that triggered the action we have taken. That is why we need to ensure that these matters are clarified. The most recent round of discussions has ended, but talks are not over and a conclusion has not yet been found.
Discussions have been taking place between Iceland and the International Monetary Fund, and the IMF issued a press release on 24 October announcing that it had reached an initial staff-level agreement with Iceland on a $2.1 billion two-year loan to support an economic recovery programme, to help it to restore confidence in its banking system and stabilise its currency. We welcome that and hope that the IMF would want to stress, as part of the conditions of any loan, that Iceland must act in accordance with the law and treat all creditors favourably, from whichever country they come.
This has been an important and useful debate, and a number of questions have rightly been raised. I would like to think that I have answered as many of the key questions as possible. The hon. Member for Leominster raised a number of detailed questions. If the Committee allows, I shall respond to those directly in writing, because I do not think that that level of detail can easily be responded to straight away.
Question put and agreed to.
That the Committee has considered the Landsbanki Freezing Order 2008 (S.I. 2008, No. 2668).


That the Committee has considered the Landsbanki Freezing (Amendment) Order 2008 (S.I. 2008, No. 2766).—[Ian Pearson.]
Committee rose at six minutes to Six o’clock.
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Prepared 28 October 2008