Icelandic bank returns most of council's £2m

Newark and Sherwood District Council has announced it has received 81% of its deposit with the failed Icelandic bank Glitnir.

The remainder will be returned as soon as the Icelandic government lifts the restrictions on the Icelandic krona to allow it to be converted into sterling.

The £2m fixed term deposit was originally made in January 2008 for a period of one year when Icelandic banks were regarded as among the safest by the international ratings agencies.

The council does not invest directly in foreign banks but only makes sterling deposits in subsidiaries trading on the London money market.

However, when the parent company defaulted the assets of all subsidiaries were converted into Icelandic krona and became part of the winding up procedures.

From an early stage the Local Government Association took the lead in co-ordinating the claims of more than 120 UK public authorities including county councils, district councils, fire and police authorities.

It appointed specialists in Icelandic company law to act on behalf of all the UK authorities to minimise the costs to councils.

A long process of evaluating the assets of the bank and establishing the legal status of local authority depositors culminated in the Icelandic Supreme Court decision in October 2011 that the authorities were classed as priority creditors and therefore entitled to first call on the bank’s assets.

David Dickinson, the council’s director of resources, said: “We have had to wait a long time for this money to be returned but we have always believed that we had a strong case and I can say that at no time has it affected the service we deliver to the public.

"We are particularly grateful to the Local Government Association and Bevan Brittan, their legal advisors, for all their work in bringing the matter to a successful conclusion.”