The British Bankers' Association has said that the banks in the UK have to pay more than £1 billion to protect the savers in Iceland.

The bankers have paid the first of three equal instalments amounting to £363 million to the Financial Services Compensation Scheme. The banks are being forced to pay as the FSCS was unable to recover the full amount that was owned by Icelandic banks Icesave, Heritable Bank and Kaupthing Singer & Friedlander.

BBA chief executive Anthony Browne said, "This compensation ensured that no savers who had money in Icelandic banks lost out. These payments show that the system works, and we hope it gives confidence to consumers that if there is ever another bank failure that their savings will be protected."

The government had guaranteed that the savings of hundreds of thousands of British customers at Icelandic banks would be protected in 2008. Thus the banks are now being forced to pay to meet the costs of these estimates. The FSCS gets finding from the bank and guarantees the deposits of UK account holders. According to estimates, there is a further shortfall of £500 million to recover after April 2016 from Icelandic banks.