Charities may yet recover Iceland funds

Treasury Select Committee recommends full compensation for those that lost money in failed banks

Charities should be compensated in full for any losses they suffered in the Icelandic banking collapse, according to an influential group of MPs.

A report by the Treasury Select Committee into the impact of the crisis, published today, recommends that affected charities should receive the amounts lost in full through the Financial Services Compensation Scheme, the statutory fund that pays compensation to customers of authorised financial services firms.

"At a time when more people than ever may be faced with difficult circumstances, we believe it is imperative that charities have access to the funds that were provided to them by the public," the report says.

"We recommend that, on this occasion only, all charities should be compensated for losses incurred as a consequence of the failure of the Icelandic banks."

The committee has also recommended that the Government should clarify charities' status under the Financial Services Compensation Scheme.

The report, entitled Banking Crisis: The Impact of the Failure of the Icelandic Banks, is based on an investigation into the crisis and includes evidence submitted by umbrella bodies the NCVO, Acevo, the Charities Aid Foundation and the Charity Finance Directors' Group.

John Low, chief executive of CAF, who gave evidence to the committee, said he was happy with the report's recommendations.

"They listened sympathetically to the evidence CAF gave and recognised the injustice of the situation," he said. "We now need the Chancellor to act swiftly and compensate those who have lost funds."

A Treasury spokesman said it would consider the report and respond in due course.

"The Government is continuing to work with the Icelandic authorities and through the International Monetary Fund to ensure fair treatment for all UK creditors," he said. "We have been clear that we will fully support charities in pursuit of any claims through administration."

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