Published: Thursday, 9th October, 2008 11:00
Council could lose £5m in Iceland bank collapse
By Adam Hewitt
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Wokingham Town Hall
WOKINGHAM Borough Council could lose £5m of taxpayers’ money deposited in collapsed Icelandic banks.
The council is one of more than 20 that could lose millions as a direct result of the credit crunch.
Although the Government has pledged to protect private depositors in the failing Icelandic banks, Chancellor Alistair Darling told the House of Commons yesterday that local authorities and Transport for London were “well-informed investors” and so not covered by the guarantee.
Council spokesman David Allen said: “Wokingham Borough Council is one of the local authorities to have made investments in the Icelandic banks (£3m in Heritable and £2m in Landsbanki) that have currently stopped depositors withdrawing assets.
“At the time of the investments, the borough council’s policy was to only invest in highly secure organisations and both banks concerned had high financial security ratings. Since the onset of the recent international financial problems, the council has further tightened its policy and is now only investing in the safest AAA rated companies and Government backed organisations.
“The council is doing everything in its power to ensure it recovers its investment and is backing the Local Government Association’s lobbying of central government on behalf of a substantial number of authorities to extend the protection being given to retail investors to cover local authorities as well.
“Wokingham Borough Council takes its responsibilities to its residents very seriously but could not have foreseen the extent of this current financial crisis. However we can assure residents that we will continue to strive to ensure that local residents do not lose out in the current situation.”
Margaret Eaton, chairwoman of the Local Government Association, said: “We are today seeking an assurance from the Chancellor that councils’ assets will be protected in the same way as personal assets.
“In the short term, these councils are confident that they will have sufficient funds to tide them over for a considerable period of time.
”Whilst this may affect some councils financially, we do not expect it to have any impact on local services.”
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