Cash-strapped Powys County Council has a £4 million cash investment in two Icelandic banks which have gone into receivership.
The deposits, which are approximately six per cent of the authority’s cash investments, are in the Landsbanki and the Glitnir banks.
The UK government has frozen all the British assets of Landsbanki. It follows the decision by Iceland’s government to take over the company, which ran the internet bank Icesave, leaving 300,000 UK residential customers unable to access their savings.
Powys bosses say it is too early to say whether the cash is at risk, but they are concerned at unfolding events and are monitoring the situation closely.
They said the cash, which would be used on services, had been invested to make a good rate of return.
A spokesman for Powys County Council said their investment cash was spread widely across many banks and their finance team was monitoring other investments as closely as possible in the current volatile situation.
The spokesman said: “The council has a £4 million cash investment with two Icelandic banks, the Landsbanki and the Glitnir. This is approximately six per cent of our cash investments.
“We are naturally concerned at unfolding events and are monitoring the situation closely. It is too early to say whether our cash is at risk or not.”
Brecon and Radnorshire MP and Shadow Secretary of State for Wales, Roger Williams, wrote to the Chancellor Alistair Darling yesterday (Thursday) to set out his concerns and seek reassurances.
Mr Darling has said that he will ensure all UK savers with accounts with the closed internet bank Icesave will get all of their money back. But the position with corporate investors, such as local authorities, is less clear.
Mr Williams said: “My experience of Powys County Council, both as an MP and when I was a member of the council, is that they are very prudent with their funds.
“The Treasury guidelines for investments by local authorities say they should spread their deposits widely so they are not in one single bank. I think this arose after the issue with the Western Isles Council that had all its money with Bank of Credit and Commerce International that went bust a few years ago. Powys County Council has acted within the Treasury guidelines and there should be some protection from the Treasury.”
Mr Williams said he had written to the Chancellor on behalf of Powys County Council but also all the other Welsh councils affected and a Powys charity, which has contacted him worried about some money they have invested for development work.
Powys County Council is one of many British local authorities with money invested in Iceland’s banks, and they are now working with the Welsh Local Government Association to try and gain assurances that the deposits will be protected.
Four other Welsh councils are also known to have investments with the Icelandic banks, including Flintshire with £3.7million, Rhondda Cynon Taf (£3m), Monmouthshire (£1.2m) and Ceredigion with undisclosed sums.
A spokesperson for the Welsh Local Government Association (WLGA) said the situation was being carefully monitored. In a statement, they added that councils were “clearly concerned at the security of their investments but it is too early to say whether they are at risk”. The matter was expected to be the subject of intense discussion at the AGM of WLGA, which began in Llandudno yesterday (Thursday).
The Local Government Association, which represents councils in England and Wales, said it has identified more than 20 councils which are believed to have deposits in Landsbanki or Heritable, which was run by Landsbanki.
