Icelandic cash wrangle could take years

It could take years to get back all the millions of pounds local authorities invested into the failed Icelandic banks, a financial expert has warned.Norfolk County Council, Breckland Council and Yarmouth Council invested over £40 million in the country's banks which they had hoped would reap them hefty returns but now remain frozen since the collapse last month.

It could take years to get back all the millions of pounds local authorities invested into the failed Icelandic banks, a financial expert has warned.

Norfolk County Council, Breckland Council and Yarmouth Council invested over £40 million in the country's banks which they had hoped would reap them hefty returns but now remain frozen since the collapse last month.

Mark Finch, head of finance at Breckland, told members of the council's audit committee on Friday that the situation could become as drawn out as the saga involving the BCCI (Bank of Credit and Commerce International) which was liquidated in 1991 affecting millions of depositors and losing billions of pounds.

“BCCI has not yet been resolved,” he said. “These things can take years and we have no idea how much we can expect to receive back or when it is likely to be received.

“We will wait and see with bated breath but we do not yet know how we will be treating it on our balance sheets at the end of the year.”

He added that the UK Treasury was conducting negotiations with Iceland for all UK interests but the scale of the problem was unprecedented.

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“We were following treasury management policy guidelines with these investments,” he said. “But it does question how much value you can put on credit ratings. Early indications suggested their assets were covering their debts but it is not clear whether the money is still in the UK or has been transferred back to Iceland. We would hope the administrators hold out to get maximum value back rather than a speedy resolution with less value.”

A group representing UK authorities is set to travel to Iceland with the support of the Local Government Association to argue the case for returning their funds. Officers from Kent County Council and Barnet Council will be making the trip with legal advisers Bevan Brittan.

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