Magazine article Public Finance

Iceland Bank Payouts 'Vindicate Councils'

Magazine article Public Finance

Iceland Bank Payouts 'Vindicate Councils'

Article excerpt

Councils are pleased but not surprised by news that they are likely to get back most of the money they deposited in Iceland's failed banks.

Ernst & Young, the administrators of Heritable Bank, the UK arm of Landsbanki, has indicated that creditors can expect to get 80% of their money back more if markets are favourable.

Councils with investments in Heritable can expect their first payments towards the end of Jury.

'It is good news, but it's not unexpected,' Local Government Association deputy chair Richard Kemp told Public Finance. Predictions that local authorities in England would lose around £lbn were always ludicrous', he added. 'We knew we'd get back the lions share.'

But while the UK branches of Icelandic banks may be able to make refunds, it's unclear exactly what councils can expect from those based in Iceland, which are subject to different laws and administration processes.

Kemp said he was optimistic that local authorities - which are preferential creditors - would eventually receive similar returns from the other banks. 'It wouldn't surprise us to see councils getting back 70%-80% of the total,' he said.

The London Borough of Havering, which has £12.5m invested in Icelandic banks, of which £6.5m is with Heritable, also welcomed the news. …

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