Retail depositors in Icesave, the failed Icelandic internet bank, were yesterday told to expect refunds over the coming month as the government made £800m available for compensation. Alistair Darling, chancellor, guaranteed all UK deposits made by individuals in the Icelandic bank following the collapse of Landsbanki, the owner of Icesave. The Treasury is to advance £800m to the Financial Services Compensation Scheme to cover the repayments exceeding the depositor compensation limit of £50,000.

Officials are seeking to recover the advance when and if Icesave is placed into administration. Landsbanki, closed in early October, leaving 230,000 customers without access to their savings. Depositors are to receive a letter from the FSCS next week explaining the refund process.