C. Heritable Bank plc Transfer
of Certain Rights and Liabilities Order 2008 (SI 2008/2644)
Transfer of Rights and Liabilities to ING Order
2008 (SI 2008/2666)
Kaupthing Singer & Friedlander Limited Transfer
of Certain Rights and Liabilities Order 2008 (SI 2008/2674)
Summary: These three Orders, which HM Treasury
have made under the Banking (Special Provisions) Act 2008, are
intended to help maintain the stability of the UK financial system
by dealing with the impact on UK depositors of the difficulties
affecting Icelandic banks.
These Orders are drawn to the special attention
of the House on the ground that they give rise to issues of public
policy likely to be of interest to the House.
14. HM Treasury (HMT) have made these three Orders
under powers conferred by the Banking (Special Provisions) Act
2008 ("the 2008 Act").
An Explanatory Memorandum (EM) and Impact Assessment (IA) have
been provided in the case of each Order.
15. The Heritable Bank plc Transfer of Certain
Rights and Liabilities Order 2008 (SI 2008/2644) was laid and
brought into force on 7 October. Its purpose was to transfer the
retail deposits of the Heritable Bank ("Heritable")
into a period of public ownership in order to be able to pay out
retail depositors in an orderly manner. It achieved this by transferring
those deposits to Deposits Management (Heritable) Ltd, a company
wholly owned by the Treasury for the purposes of the 2008 Act.
Heritable was a UK-based banking subsidiary of the Icelandic bank,
Landsbanki, which has been placed into receivership in Iceland.
16. The Transfer of Rights and Liabilities to
ING Order 2008 (SI 2008/2666) was laid and brought into force
on 8 October. It transferred the retail deposits held by Deposits
Management (Heritable) Ltd (as a result of SI 2008/2644) to ING
Direct N.V, a company incorporated in the Netherlands ("ING
Direct"). The relevant IA states that the Order transfers
Heritable's deposit book to ING Direct, and explains that "the
Government has considered a number of options and, having weighed
up the various competing considerations, has assessed this to
be the best solution for protecting depositors and ensuring retail
consumer confidence." In a press release of 8 October, HMT
have said that ING Direct is working to rapidly ensure that it
is business as normal for all customers.
17. The Kaupthing Singer & Friedlander Limited
Transfer of Certain Rights and Liabilities Order 2008 (SI 2008/2674)
was also laid and brought into force on 8 October. It transferred
the Kaupthing deposit book of "Edge" accounts to a publicly
owned company followed by an immediate transfer of retail deposits
of Kaupthing to ING Direct, in order (as HMT state in the EM)
to "provide protection and continuity of business for depositors."
Kaupthing Singer & Friedlander (KSF) was a UK-based banking
subsidiary of the Icelandic Kaupthing Bank. In a separate press
release of 8 October, HMT have said that the Financial Services
Authority, which regulates KSF, had determined that KSF no longer
met its threshold conditions, and was likely to be unable to continue
to meet its obligations to depositors.
This press release also confirmed that, following the transfer,
ING Direct was working to rapidly ensure business as normal for
18. On 13 October, the Chancellor of the Exchequer
made a written statement about the impact of these transfers on
the Contingencies Fund.
This explained that the Financial Services Compensation Scheme
(FSCS) had paid out approximately £3 billion to enable retail
deposits held in Heritable and KSF and covered by the FSCS to
be transferred to ING Direct; and that the FSCS had financed its
payout through a short-term loan from the Bank of England, which
would be replaced with a loan from the Government after a short
period of time. As regards retail deposit amounts not covered
by the FSCS, the statement added that HMT had made a payment to
ING Direct, amounting to approximately £600 million; and
that, pending Parliamentary approval for additional provision
in a Supplementary Estimate, urgent expenditure estimated at £600
million had been met by repayable cash advances from the Contingencies
19. We report separately on the Landsbanki Freezing
Order 2008 (SI 2008/2688) which freezes funds in relation to Landsbanki.
We believe that the House will be interested to see that the Government
have in parallel made use of powers under the Banking (Special
Provisions) Act 2008 to seek to secure the continued stability
of the UK financial system against the impact of difficulties
affecting Icelandic banks.