Iceland Bank Crisis Hits Peterborough

21 July 2010, 11:17 | Updated: 21 July 2010, 11:29

Peterborough City Council has confirmed it expects to lose at least £590,000 that was invested with banks in Iceland when they collapsed.

The authority was one of more than 120 councils that had money in accounts in Iceland.

Peterborough City Council invested a total of £3million.

The cash was invested for a fixed period of time, and could not be withdrawn when the first signs of Iceland's economic difficulty were spotted.

It was deposited into two banks, both of which collapsed in 2007.

Since that time, local councils have been working with the Local Government Association and the relevant banks in Iceland to get as much money as possible returned to them.

£1million was with Heritable Bank, and Peterborough City Council expects to re-coup between 79p and 85p out of every pound.

This means a potential loss of between £150,000 and £210,000.

Another £2million was invested with Kaupthing Singer Frielander, of which PCC expects to recover between 65p and 78p in every pound.

Those figures mean a potential loss from that bank of between £440,000 and £700,000.

When the potential losses from both banks are added up, the most Peterborough City Council can lose is £910,000.

The least it can expect to lose is £590,000.

Peterborough City Council says the money was invested in accordance with best practice and guidance nationally, and points out that The Audit Commission, which is responsible for oversight of financial management in the public sector, also had funds invested in Iceland.