Iceland has entered into an agreement to repay losses incurred by the U.K. and Netherlands governments in connection with the collapse of the Icesave bank in 2008, according to the Dutch government.

Under terms of the deal, Iceland will pay back the money the UK and Dutch governments spent billions of euros to reimburse its citizens who lost their money in the Icesave fiasco.

The agreement also specified that repayments could not exceed 1.3 percent of the value of Iceland's annual economic output.

The repayments will commence in 2016 and will be completed by 2046, according to Dutch officials. Iceland will pay a fixed interest rate of 3 percent to the Dutch and 3.3 percent to the UK.
Netherlands it expects to receive 1.3-billion euros.

The statement did not specify how much Britain would receive, however Holland and the UK were reported to have collectively spent a total of 3.9-billion euros to reimburse their domestic savers.

Dutch finance minister Jan Kees de Jager said that the final deal remains subject to approval by Iceland's president and politicians. The Icesave saga is not over yet, he was quoted as saying.

A spokesman for the UK treasury said he welcomed the agreement and that the British government looked forward to successfully resolving the issue by signing a new loan agreement with Iceland.

A mutually satisfactory outcome will mark a new chapter in our relations, he said.

Icesave was an online bank run by the Icelandic bank Landsbanki, which was placed into receivership in October 2008 at the height of the global credit crisis.