County council poured £17 million into failed Icelandic banks this summer with £7 million deposited
PUBLISHED: 20:11 15 October 2008 | UPDATED: 13:39 06 May 2010
MILLIONS of pounds of taxpayers money invested in failed Icelandic banks by Herts County Council were deposited only this summer. The meltdown of the Icelandic banking system could leave the county council with losses of £28 million and the Herts Police
MILLIONS of pounds of taxpayers' money invested in failed Icelandic banks by Herts County Council were deposited only this summer.
The meltdown of the Icelandic banking system could leave the county council with losses of £28 million and the Herts Police Authority with losses of £3 million.
Of that £28 million, the county deposited £7 million in September, another £7 million in August and £3 million in July - a total of £17 million in the last three months. Yet in July this year questions were asked in Parliament about the solvency and stability of the Icelandic banks operating in Britain.
Three of those Iceland banks - Landsbanki, Kaupthing and Glitnir - were nationalised last week to prevent their collapse but the county's money is stuck there with no guarantee that all, or indeed any of it of it, will be returned.
Although the British Government has assured individual savers in this country that they will be refunded, the guarantee does not apply to institutions like local authorities and charities.
On September 15 the county, under its director of finance Chris Sweeney, deposited £2 million for a seven-month term with Heritable Bank, a subsidiary of Landsbanki. Five days later on September 20, it put a further £5 million in the same bank for a three-month term.
On July 11, county had deposited £3 million with Landsbanki for a three-month term; on August 5 it put £5 million into the same bank, again for a three-month term; and on August 29 it handed over £2 million, again for a three-month term.
The remainder of the £28 million is made up of £4 million in Kaupthing and £7 million in Glitnir.
On the county's website on Friday, it was stated:
"We manage our investments to secure the best return we can for taxpayers but without taking risks with institutions that have poor credit ratings. We only invest in highly-rated banks and our investments are constantly reviewed. These Icelandic banks were all "A" rated when we made our investments and no-one could have predicted the present situation."
However in January this year, one of the top credit rating agencies, Moody's, warned that it was planning to cut ratings on the main Icelandic banks and a month later downgraded Glitnir, Kaupthing and Landsbanki from C to C-minus. In April Standard and Poor's, another credit rating agency, downgraded Glitnir.
At this time, the county had deposits with Kaupthing and Glitnir yet despite "constantly reviewing" the investments, left them there despite the change in ratings.
As for no-one being able to predict the present situation - Brighton and Hove City Council removed £5 million from Kaupthing last October.
On Tuesday, Herts County Council's Tory leader Robert Gordon was calling the possible loss of £28 million of taxpayers money a problem but not a crisis.