European regulators: Iceland violated EU rules for Icesave clients

European regulatory officials have said that Iceland violated EU regulations amid its 2008 banking collapse. The European Free Trade Association’s Surveillance Authority said in a Luxembourg courtroom that Iceland did not follow protocol that would make sure that its British and Dutch Icesave clients were properly compensated as a result of losses on their investments during the crash.

Under EFTA rules, Iceland’s central government was required to commission a minimum amount of compensation payments for the investors over a set time frame.

EFTA Surveillance Authority lawyer Xavier Lewis said, “Iceland seemed to have discharged its duty to supervise the deposit guarantee scheme by actually doing nothing at all,” Bloomberg reports. He added that the EU regulations were designed to “prevent a run on banks,” and added, “the consequence of Iceland’s argument is the greater the risk of a run on banks, the lesser the protection provided.”

Following the 2008 collapse, Dutch and British investors were compensated by their own governments, both of which are now asking European authorities to make Reykjavik repay the full amount as well as any interest accrued since the ordeal.