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Council anxious over £2m investment

PUBLISHED: 11:41 10 October 2008 | UPDATED: 12:00 03 July 2010

GREAT Yarmouth Borough Council is facing an anxious wait to see if will recoup all or any of the £2m it invested with a collapsed Icelandic bank.

And in a further blow to local council taxpayers, Norfolk County Council revealed it has £32.

GREAT Yarmouth Borough Council is facing an anxious wait to see if will recoup all or any of the £2m it invested with a collapsed Icelandic bank.

And in a further blow to local council taxpayers, Norfolk County Council revealed it has £32.5m invested in three failed Icelandic banks.

Yarmouth council made its three-month investment in Heritable Bank - part of Iceland's second biggest bank Landsbanki - on July 15 and was due to get its money back with nearly £30,000 interest next week.

However, the bank collapsed on Tuesday with the retail deposit business being transferred to Ing Direct, a wholly owned subsidiary of Ing Group.

The council's deputy leader Barry Stone said it was unclear whether there was any chance of recouping all or part of the money via the administrators or whether the British government would reimburse councils as they have pledged to do for individual investors.

He said there would be no short-term impact on council services or council tax but could make no guarantee for the longer term if all the money turned out to be lost.

“We would make every endeavour to mitigate the effect but it might impact on future capital programmes,” he said.

Mr Stone stressed that when the money was invested, Heritable Bank had a top credit rating so there was no reason to fear what had happened.

He said the council would be lobbying government, along with other affected authorities, to provide the same protection as for individual investors.

He revealed the council had a further £5m invested - £2m with Irish Nationwide, invested on October 2 for 3 months, with the Irish Government having guaranteed all investments; £2m with EBS Building Society, invested on the July 22 for 6 months and £1m with the Derbyshire Building Society, invested on the September 4.

A spokesman for Norfolk council said they would be urging the county's MPs to lobby government to provide the same guarantee for authorities as individuals.

He said their money was invested over a two-year period so there would be no immediate impact even in the worst case scenario of it being lost.

However, he warned in the longer term there could be an impact on council services and/or council tax.

It is believed more than 20 authorities across the country are in the same predicament.

Yarmouth's Labour county councillor and former leader of the Labour opposition on the borough council Trevor Wainwright said: “This is taxpayers' money at risk. There were certainly doubts raised about Icelandic banks earlier in the year and I wonder if checks were as rigorous as they could have been.”

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