Councils to Demand Back "Every Penny"

From failed Icelandic bank which owed Ealing Council £2m

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Ealing Council


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Local authorities, including Ealing Council, lost almost £1 billion investing in Icelandic banks which collapsed late last year.

While some banks say they will repay the councils in full, Glitnir has warned that only a quarter of cash could be handed back as part of a winding up process.

LGA deputy chairman Richard Kemp said Glitnir was breaking the law, which he argued was clear that councils should be treated as priority customers. Mr Kemp said £110 million had already been repaid to councils, and more money was expected early in the new year.

And he called on the Government to launch an independent inquiry into why ratings agencies had continued to give Icelandic banks top marks shortly before they failed.

Speaking ahead of the meeting in Iceland, he told BBC Radio 4's Today programme: "We want every penny back for British council taxpayers.

"We deposited it in good faith with these banks, they were banks that were regulated under Western democracies, with external auditors, with credit reference agencies giving AAA ratings until hours before they went under.

"We expect to be paid back in good faith by those banks in return."

An Ealing council spokesman said: "We will continue to work with the LGA to get our money repaid and we remain confident that this will happen. In the meantime Ealing remains a financially strong council and residents can be reassured that our financial reserves are very robust."

Yesterday the Serious Fraud Office (SFO) launched a probe into suspected UK fraud at failed Icelandic bank Kaupthing before its collapse in October 2008.

The SFO will examine whether the bank misled savers to encourage deposits into its Kaupthing Edge account and investigate why large sums flooded out of the bank in the days before it failed.

More than 30,000 UK individuals, companies and organisations invested in Kaupthing Edge accounts, the SFO estimates.

December 19, 2009