No fault for borough over Iceland banks

IPSWICH borough has escaped accusations of negligence, despite investing �5million of council taxpayers' cash in the collapsed Icelandic banking system.

IPSWICH borough has escaped accusations of negligence, despite investing �5million of council taxpayers' cash in the collapsed Icelandic banking system.

Local authorities have been sharply criticised by spending watchdog the Audit Commission - which itself had put money on deposit in Iceland - for putting a further �33m in to deposit accounts in the final days before their collapse.

The Commission said seven English authorities breached official guidance and their own treasury management protocols in continuing to invest in Iceland after the banks' credit ratings were downgraded below acceptable levels. One authority failed to open an email warning of the ratings change, another was using out of date information, while a third exceeded its own limit for deposits in a single bank.

In total, �32.8 million was deposited between the downgrading of the banks' rating to ``adequate' on September 30 last year and the collapse of the Glitnir and Landsbanki banks on October 7.


You may also want to watch:


The biggest investor, according to the Audit Commission, was the South Yorkshire Pensions Authority which deposited �10 million on October 2, followed by Kent County Council which made two deposits totalling �8.3 million on October 1 and 2.

The others to make deposits during that period were North East Lincolnshire council (�4.5m), Redcar and Cleveland council (�4m), Restormel council (�3m), London Borough of Havering (�2m), and Bridgnorth council (�1 million).

Most Read

The commission said that the authorities involved had ``negligently deposited money after credit ratings for Icelandic banks were downgraded below acceptable levels.”

In all, 127 English local authorities had a total of �954m deposited with Glitnir and Landsbanki when they went into administration. It remains unclear how much, if any, of that money will be recovered.

Deputy council leader John Carnall said Ipswich had not lost �5m. “The Local Government Association is working with the administrators of the banks to get some or all of the cash returned to us.”

The Audit Commission acknowledged that it had had to review its own approach after itself investing �10m in Iceland, but insisted that this did not compromise its ability to analyse what went wrong.

Become a Supporter

This newspaper has been a central part of community life for many years. Our industry faces testing times, which is why we're asking for your support. Every contribution will help us continue to produce local journalism that makes a measurable difference to our community.

Become a Supporter
Comments powered by Disqus