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UK officials sent to Iceland over bank deposits

  • Story Highlights
  • Britain sends delegation to Iceland to resolve dispute over savings in Icelandic banks
  • British government has frozen all British assets in Icelandic banks
  • UK Police, transport authorities and council have around $200m in Iceland
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LONDON, England (CNN) -- Britain is sending a delegation of officials to Iceland to resolve a dispute over British savings in Icelandic banks, spokesmen in both countries said Friday.

British Prime Minister Gordon Brown used anti-terrorism legislation to freeze the assets of Icelandic banks.

British Prime Minister Gordon Brown used anti-terrorism legislation to freeze the assets of Icelandic banks.

The British government has frozen British assets in Icelandic banks, and British Prime Minister Gordon Brown has vowed legal action against Iceland to ensure British savers get their money back.

An official with Iceland's Foreign Ministry called the delegation's trip a "positive step" and said Iceland was "cautiously hopeful" about resolving the issues over the weekend.

The dispute follows Iceland's nationalization of its three largest banks, Landsbanki, Glitnir, and Kaupthing. Thousands of people in Britain, attracted by the banks' interest rates, had deposited their savings in the banks and are unsure whether they'll get their money back. Read Todd Benjamin's blog

British savers include local governments and authorities. The Metropolitan Police Authority, which oversees London police, has $50.9 million tied up in an Icelandic bank; Transport for London, which runs the transit system, has $67.9 million at stake; and Kent County Council, southeast of London, has $84.9 million deposited in three Icelandic banks.

The British government used anti-terrorism legislation to freeze the assets, Lord Alan West told the House of Lords on Thursday. Read Richard Quest's G7 blog

"This is entirely the responsibility of the Icelandic authorities," Brown said late Thursday. "They have defaulted and they have done so in a way which is unacceptable to Britain."

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Freezing the assets will protect British savers in the event the Icelandic government, on the brink of bankruptcy, is unable to guarantee the deposits, officials said. British savers fear that even if Reykjavik can pay back the money, it could choose to compensate Icelandic savers first, leaving foreign depositors at risk. Video Watch Todd Benjamin on the markets »

The banks involved are Heritable, the UK subsidiary of Landsbanki; Kaupthing Singer & Friedlander, the UK subsidiary of Kaupthing; Icesave, a British branch of Landsbanki; and Glitnir.

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