| Synopsis: |
In this report, "Banking Crisis: The Impact of the Failure of the Icelandic Banks (HC 402)", the first in a series on the banking crisis, the Treasury Committee considers the impact of the failure of the Icelandic banks on three sets of depositors: local authorities; charities; and, UK citizens who deposited in the Isle of Man and Guernsey subsidiaries of the Icelandic banks. It considers the case for the provision of assistance by the UK Government to each of these depositors. The Committee does not accept that there is a need to provide assistance to the local authorities. It does however recommend that, on this occasion only, all charities should be compensated for losses incurred as a consequence of the failures of the Icelandic banks. Finally, it agrees that the overarching principle should be that the UK Government cannot provide cover for deposits held by British citizens in jurisdictions outside the direct control of the United Kingdom.As such, while acknowledging the severe distress of those UK citizens suffering due to the Icelandic banking failure, the Committee can only recommend that the UK authorities work with the Isle of Man and Guernsey authorities to resolve these issues. This aspect of the Committee's Banking Crisis inquiry has also raised many new questions about issues such as consumer advice and cross-border regulation of financial institutions. Considerable taxpayer support has been required to provide rapid compensation to onshore UK depositors in Icelandic banks that were 'passported' into the UK regulatory system. This area of European law requires further consideration and the Committee intends to return to it in a future inquiry onto the banking crisis within its international context. |