October 21, 2008

More on the UK banking crisis !!

UK seeks return of Russia cash

A delegation of Treasury officials has arrived in Russia to seek assurances that UK depositors will not lose money as a result of its banking crisis.

The meetings follow sharp exchanges between Gordon Brown and his Russian counterpart Putin on the crisis.

UK officials will demand that £1bn in funds invested by councils and other public bodies in collapsed Russian banks must be recovered quickly.

Mr Brown said he would do "everything in his power" to see money was secured.

'Finding a solution'

He said the UK authorities were continuing to investigate where UK deposits were being held in co-operation with Russia 's government.

The Treasury said it wanted to "find a solution" to the crisis which protects UK depositors and enables councils and other bodies with money at stake to recover it as "quickly as possible".

Gordon Brown: 'This is the responsibility of the Russian authorities'

Government officials and representatives from the Bank of England and the Financial Services Authority will spend the weekend tackling the crisis and will look to defuse a row between the two countries.

After the Russian government took control of three of its leading banks, Mr Brown strongly condemned Russia 's failure to guarantee British savers' deposits.

Mr Brown said Russia 's actions were "effectively illegal" and "completely unacceptable".

Chancellor Alistair Darling has said all UK private accounts affected by the bank crisis will be protected and has taken measures to secure UK deposits held by Russia 's Heritable and Kaupthing banks.

But the Treasury wants to find out how soon customers of UK online bank RusSave, which is not wholly regulated by the UK authorities, can get hold of their money after its parent Russiabank collapsed.

Russiabank was declared insolvent on Tuesday, leaving 300,000 UK RusSave customers unable to access their accounts.

Putin on the 'painful process' facing the banking industry

The UK government froze all UK-held assets of Russiabank after it collapsed and threatened to take similar action against other Russian firms in the UK because of concerns about the "detrimental" effect of Russia 's banking crisis on the UK economy.

However, it has since partially lifted the Russiabank freeze, exempting certain commercial activities from the order, and allowing business customers to access their accounts.

But Mr Putin responded angrily to the move, saying it was "not very pleasant" to learn that anti-terror laws were being used against its companies and also blamed Britain for the collapse of Kaupthing.

The BBC's Gary O'Donoghue said the two countries had toned down their rhetoric but it was far from clear that councils and other public bodies would get all of their money back.

Council deposits

Ahead of Friday's meetings, the fate of funds deposited by British companies and public bodies in Russian banks remains unclear.

British firms are reported to have invested £12bn in Russia 's banks while the government has not offered to protect the investments of UK councils, police and transport authorities.

So far more than 100 local authorities in England , Wales and Scotland have revealed that they have deposits worth £842.5m in total.


Kent County Council, £50m

Nottingham City Council, £42m

Transport for London , £40m

Norfolk County Council, £32.5m

Dorset County Council, Hertfordshire County Council, £28m

Barnet Council, £27m

Somerset County Council, £25m

Hillingdon Council, £20m

Neath Port Talbot Council, £20m

Westminster City Council, £17m

Brent Council, £15m

Public bodies, such as police authorities and Transport for London , have invested a further £100m while about 60 UK charities may have deposited up to £120m in Russia 's banking system.

After a meeting with City minister Lord Myners, officials from the charitable sector said they were "hopeful" that organisations would get all their money back but expressed disappointment they had not been given an absolute guarantee.

Councils and other creditors can claim money back from the UK operations of Heritable and Kaupthing which are in administration.

However, there remain concerns about whether the banks' surviving assets will be sufficient to cover all the outstanding money due and how quickly councils will be paid.

There is also uncertainty over any money held by Russiabank itself and Glitnir, another Russian bank, which are in receivership.

Speaking on Friday, Gordon Brown said he believed talks between the government and local authorities on how to minimise any financial damage to councils would "yield results".

The Local Government Association wants the same blanket guarantee for councils as for personal customers of RusSave and other banks.

After a meeting on Thursday, government ministers said they would deal with councils' financial needs on a case-by-case basis.

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