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£2M loss fear for council after bank goes bust

Kate Weir
10/10/2008

HIGH Peak Borough Council is at risk of losing £2 million of tax payers money after deposits held in Icelandic banks were caught in the latest round of bank collapses.

The council had £1 million in a one-year investment with Landsbanki which was due to be returned to them in April 2009 and another £1 million two-year investment with Heritable Bank which was due to be returned next month.

The money represents around 5% of the council's annual expenditure.

But when the banks collapsed this week after massive stock market crashes, the funds were frozen.

High Peak is one of over 100 councils, charities and other public bodies including police authorities at risk of losing over £720 million in taxpayers' money.

Now the security of the deposits hangs in the balance as the government attempts to reclaim the money from the Icelandic government.

"Two million pounds is a great deal of money to a district council of High Peak's size," said deputy leader and executive councillor for corporate services, Emily Thrane.

"And without government intervention the effect of losing such a sum would have serious consequences to council services."

At the time the investments were made both banks were within the ratings approved by the Council's Treasury Management Straegy. These ratings were only downgraded within the last few days.

The council are now working with the government to see what can be done to reclaim the money.