CONCERN FOR NAC MONEY IN ICELAND

John Martin Fulton • Published 15 Dec 2009 14:49

Web exclusive - Worries that millions will be lost

THERE is growing concern among councils after the collapsed Iceland bank which held £10m of North Ayrshire money refused to give priority to repaying local authorities.

Now there are worries that the likes of North Ayrshire Council could be left counting the cost, with some estimates claiming that less than 30 percent of that £10m may be returned to council coffers.

Other council are reportedly threatening to launch legal proceedings against Glitnir which collapsed last year.

The bank is being wound up by the Icelandic authorities, but unlike the other failed bank Landsbanki - which NAC had £5m invested in - Glitnir will not place banks as priorities, but as "general unsecured" deposits.

In total UK councils had £900m placed in the three Icelandic banks which failed last year.

Around £100m has reportedly been returned, although further repayments are expected in the spring.

While priority claims are expected to be repaid in full, the Glitnir deposits are far

more uncertain.

Alasdair Herbert, Asst Chief Executive (Finance), said: "The decision not to give Scottish local authorities priority creditor status on the recovery of investments in a failed Icelandic bank will be challenged in court if necessary.

"The Winding Up Board of Glitnir Bank, where local authorities have deposits of £217million, has opted to specify the claims as 'general unsecured' rather than 'priority' under the Icelandic Bankruptcy Act. Without priority status, authorities would be likely to get in the region of 25-30 per cent of their deposits back rather than 100 per cent.

"The Local Government Association, which represents councils in Scotland and has led negotiations with the Icelandic banks, has committed to challenge Glitnir's decision and take legal action if necessary. The LGA's Director of Finance, Stephen Jones, will next week attend a creditors' meeting in Iceland to make the local authority case.

"Glitnir's decision is at odds with that of Landsbanki, where council deposits of £414million were last month recognised as priority claims. By the end of the year, councils will have been repaid more than £110 million that had been locked in the four Icelandic banks that collapsed in October 2008, with further repayments expected in Spring 2010."

Tweet

Follow @irvinetimes

Return to the main index, get more from this section or browse our News archives.