Local authorities rapped over Icelandic investments

by Gill Montia

Story link: Local authorities rapped over Icelandic investments

The Audit Commission has found seven local authorities wanting for continuing to invest in Icelandic banks, despite warnings from credit rating agency, Fitch, that the banks were in difficulties.

According to a new report by the spending watchdog, the authorities placed a combined £33 million in Icelandic accounts when they should have known better.

In addition, the Times has reported that the Financial Services Authority alerted the Treasury and the Bank of England to the risks surrounding Icelandic banks at the beginning of 2008 but the concerns were not passed on to either the Department for Communities and Local Government, or the Audit Commission.

Local Government Minister, John Healey, says he will ask local government officials to work with the Audit Commission, the Chartered Institute of Public Finance and Accountancy and the Local Government Association to draw up a new set of guidelines on investments.

The Audit Commission’s report has left the watchdog open to criticism forcing an acknowledgement that it needs to review its own investment strategy, after investing £10 million in collapsed Icelandic banks.

The seven local authorities named in the report are: South Yorkshire Pensions Authority; Kent County Council; North East Lincolnshire Council; Redcar & Cleveland Borough Council; Restormel Borough Council; the London Borough of Havering and Bridgnorth District Council.