Council wants Iceland cash back

Creditors may get up to 80% of the lost funds returned

Cornwall Council financiers are in negotiations to try to recover millions of pounds lost when Icelandic bank Landsbanki collapsed.

The former Cornwall County Council invested £5m in the bank and Restormel Borough Council paid in £4m.

However all the money was lost when Landsbanki collapsed in October 2008.

In April this year administrators for Heritable Bank, the UK arm of Landsbanki, indicated its creditors could get up to 80% of funds back.

'Acted negligently'

Cornwall Council said it was involved in negotiations and was working with its lawyers to get the "best possible financial deal for the people of Cornwall."

A report by the Audit Commission in March 2009 stated that Restormel Borough Council acted negligently by investing £3m into the Landsbanki bank just days before it collapsed.

According to the commission on 30 September 2008 the official credit rating for Icelandic banks was downgraded to "adequate", which is below the level deemed acceptable in local authority guidelines.

Despite the downgrade, on 1 October Restormel Borough Council invested £3m in Landsbanki and just six days later the bank collapsed, taking the council's money with it.

The council also breached Treasury policy by investing more than it should have in a single bank - £4m in total.

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