Council Iceland alert 'too late'

Havering Council said it had followed procedures

A London council accused of depositing money in an Icelandic bank said a warning came "20 minutes" too late.

Havering Council was called "negligent" by the Audit Commission for investing £2m in October after the bank's credit rating dropped.

Rita Greenwood, the council's chief finance officer, said: "The deposit that we made was made 20 minutes before the alert came through."

The Audit Commission has accused seven English councils of ignoring warnings.

The authorities paid nearly £33m into the banks after 30 September 2008, when the credit ratings of Glitnir and Landsbanki were downgraded to "adequate" - below that deemed acceptable under guidance to town halls.

The deposit that we made was made 20 minutes before the alert came through which downgraded the banks to a lower grading Rita Greenwood, Havering Council Full list of council deposits

The Audit Commission said most councils had "heeded warnings" about the declining credit worthiness of Icelandic banks during 2008 and taken action accordingly.

However, it said that some had ignored the risks while a handful had behaved "negligently".

The councils' investments do not have the same protection as individual deposits in Icelandic banks, guaranteed by British ministers after the meltdown of Iceland's banking system.

'Procedures followed'

Ms Greenwood said: "The deposit that we made was made 20 minutes before the alert came through which downgraded the banks to a lower grading.

"And we absolutely refute being called negligent.

"We rely on ratings that are done by established international organisations such as Fitch and Moody's. And we were absolutely following all our policies and procedures."

Councils rejected the spending watchdog's criticism highlighting that the Audit Commission had itself deposited £10m in the banks.

"The Audit Commission itself says that it didn't know about the downgrade until the 6th of October," Ms Greenwood added.

Last October it emerged that at least £139m of public money had been invested in troubled Icelandic banks by London councils and authorities.

Haringey Council is thought to have invested £37m, Barnet Council invested £27m, Hillingdon Council £20m, Westminster City Council £17m, Brent Council had £15m, Havering Council had £12.5m, Sutton Council had £5.5m and Bromley Council had £5m in the banks.

Transport for London invested £40m with Kaupthing Singer & Friedlander, which went into administration by the time the figures emerged, and the Metropolitan Police Authority invested £30m.

E-mail this to a friend

Printable version