The firms went into default last week, prompting the Chancellor to guarantee full protection for UK retail savers with the two banks.
The Treasury has transferred the majority of Heritable’s retail deposit book and Kaupthing’s Edge deposit book to ING Direct, with the rest of the business of both banks going into administration.
About 3,000 non-internet retail accounts at Kaupthing Singer & Friedlander and less than 100 at Heritable have not been transferred to ING Direct and will be paid out through the FSCS.
For eligible retail depositors, the FSCS will repay up to £50,000 per person. The Treasury will cover the balances of more than £50,000, so eligible retail depositors who hold more than £50,000 are fully protected.
FSCS chief executive Loretta Minghella says: “FSCS has stepped in along with the Government, the Bank of England and the Financial Services Authority to help protect savers at the banks.
“We have worked closely with the authorities on this response. Our contribution means that people who had their accounts transferred will get immediate access to their accounts and their savings are protected.
“The money we are contributing reflects the estimated gross compensation costs we would have had to pay out if we had paid compensation in the usual way.”