Councils await news investments in Iceland banks
Councils across Oxfordshire are amongst at least 40 local authorities across the country that have been caught up in the current Icelandic banking crisis and are waiting to hear when their investments in three Icelandic banks will be re-paid.
The councils, which between them have budgets in excess of £1.3bn, have at any one time, cash flow and investment balances which are invested within the banking sector.
In common with all councils, this investment is regulated to seek cash security and uses national bank ratings to ensure credit worthiness. Councils also ensure that risk is spread by limiting the maximum exposure to any one institution - this applies in financially stable times as well as in the current turbulent times.
The Icelandic banks were highly rated when funds had been placed with them and have only been reduced very recently. The Oxfordshire councils have £28.5m invested with the Icelandic banks, which is repayable at different dates over the next year. The situation with the Icelandic Banks remains unclear and has changed several times over the last 24 hours - the Council's are pushing the government for a clear statement on the position of these funds.
The breakdown of the funds invested across the council is:
Cherwell District Council, £6.5m
Oxfordshire County Council, £5.0m
Oxford City Council, £4.5m
South Oxfordshire District Council, £2.5m
Vale of White Horse District Council, £1.0m
West Oxfordshire District Council, £9.0m
Councillor Margaret Eaton, Chairman 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. Town halls invested in Landsbanki as a reputable bank with a solid credit rating.
“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.
"Councils' experience of ensuring stability in a financial crisis will mean that they will keep vital frontline services running through thick and thin and this situation is no different.
”Prudent financial management means that councils put their money into a diverse range of banks to make sure that any risk is spread to minimise the impact of problems in the financial markets.”
Councillor Barry Norton, Leader of West Oxfordshire District Council said: "The Local Government Association will no doubt be working hard on behalf of the many councils that have funds invested with the Icelandic banks. We have been in direct contact with our MP David Cameron to ask him to press the government to ensure local authority assets are protected in the same way as individual's assets."
"Our Council's investment strategy remains robust and funds of £67million have been placed in a spread of around 25 highly credit rated institutions to reduce our exposure to any one bank failure. In this case we have £9million at risk spread over three Icelandic banks. We believe that the government, which has encouraged councils to get the best investment returns on their funds, has an obligation to press the Icelandic government to reverse its decision to abandon non-Icelandic investors in its banks or step in itself to safeguard councils' interests.
"The funds were not due to be returned until next summer so there are no short term issues for this Council's finances or its operations with business continuing as usual."
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