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June 11, 2009

MPs berate local authorities for Icelandic investment failures

by Gill Montia

Story link: MPs berate local authorities for Icelandic investment failures

Local authorities have had another telling off over their losses from the Icelandic banking disaster.

The collapse of Landsbanki last October saw over 100 authorities compromised on investments totalling almost £1 billion.

According to the Communities and Local Government Select Committee, complacency, lack of expertise and inaction played their part in putting the money at risk.

Councils should have picked up warning signs as early as 2006 and again in September 2008, when credit rating agencies downgraded the Icelandic banking sector, but some did not and even increased their investments.

The Committee’s report also criticises external agencies, such as treasury advisers, for a lack of clarity over their roles with councils, in terms of being information providers or advisers.

According to the committee’s chair, Dr Phyllis Starkey, misunderstanding, misinformation and complacency were evident within local authorities and among those who provided the investment advice.

In March, the Audit Commission berated seven local authorities in similar terms but the spending watchdog also admitted it had £10 million in collapsed Icelandic banks.

Latest reports suggest that up to 90 pence in the pound could be recovered by investors once administrators have finished their work, which could take several years.

 

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