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Solihull Council defends its Icelandic bank choice

SOLIHULL Council has again rejected any suggestion it could have done anything to prevent the loss of millions of pounds in the Icelandic bank meltdown last autumn.

SOLIHULL Council has again rejected any suggestion it could have done anything to prevent the loss of millions of pounds in the Icelandic bank meltdown last autumn.

A parliamentary investigation into how local councils in the UK jeopardised nearly £1 billion of taxpayer funds found they failed to heed “plenty of warnings” about the state of Iceland’s finances.

A report published by the Communities and Local Government Select Committee said the warning bells on Icelandic banks sounded as far back as 2006, and there were “certainly more from the spring of 2008”.

Solihull Council invested £3 million - £1 million in each of three banks - in April 2006, and Councillor Ken Hawkins, cabinet member for resources, emphasised yesterday that at that time the banks had

good credit ratings.

“The warnings that the banks were in trouble came later and if we had pulled the money out we would have incurred severe financial penalties,” he said.

“In fact they could have exceeded the interest the deposits would have earned by now if the banks hadn’t gone bust.”

The report found evidence of councils relying too heavily on credit ratings but attributed most of the blame for excessive investment in Iceland to their treasury management advisers.

Cllr Hawkins said: “We used internal treasury advisers, external advisers and other financial bodies before making the investment and I am satisfied the advice we were given at the time was good.

Negotiations for reimbursement to councils are continuing and Cllr Hawkins said he was confident Solihull would get 80 or 90 per cent of its money back - but without any interest.

He estimated the loss of interest currently at around £250,000.

 

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