Councils with deposits frozen in failed Icelandic banks could re-coup nearly all their money, local government finance experts have announced.
The Chartered Institute of Public Finance & Accountancy (Cipfa) has studied various administrators’ reports and believe councils should re-coup their investment – as long as they are at the front of the queue of investors.
Cipfa, and a group of other major auditing bodies including the Audit Commission, estimated that local authorities could get all deposits back from Glitnir Bank, around 95% from Landsbanki Islands, the Icelandic subsidiary where councils deposited money, and around 80% from Heritable Bank, Landsbanki’s UK subsidiary.
Current estimates show returns from Kaupthing Singer & Friedlander could be as low as 50% but the Local Government Association said it would be “very disappointed” if this was the case and hopeful of a far better return.
CIPFA assistant local government director Alison Scott said: “The picture is looking a lot more positive. Latest estimates from the administrators of the Icelandic banks indicate that councils can expect to get more of their money back than they first hoped.”
The LGA said that its legal advisers were confident councils would be granted ‘preferential creditor status’ but a clear timetable for the return of deposits remains unclear. Some councils may have to wait until 2012.
Meanwhile, Kent CC, which has nearly £50m with Heritable, Glitnir and Landsbanki, said that based on the CIPFA calculations, it was likely to get back 90% of its money.