2008-10-30 10 h 30 :: thecomet.net :: Probe into cash freeze

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Probe into cash freeze

10:30 - 30 October 2008
AN investigation has started into why Hertfordshire County Coun-cil invested £28m in Icelandic banks that are now insolvent.

The council has called in independent auditors PriceWaterhouseCoopers to probe their accounts as to why £17m was deposited with the Landsbanki and The Heritable, parent companies of Icesave, £7m in Glitnr and £4m in Kaupthing.

All these financial institutions have since collapsed during the current world wide banking crisis and their assets frozen causing a diplomatic row between the UK and Iceland.

The council says fixed-term deposits were made from January 2007 onwards, long before there was any doubt about the strength of the banks.

Cllr Robert Gordon, leader of the council, said: "It is too early to say whether we will lose any of the money currently frozen in Iceland and I will continue to work with the intent of seeing every penny returned.

"I have asked for this external report so that elected members and the people of Hertfordshire have a thorough and independent assessment of the treasury management lending policy set by members and the operational decisions taken by officers."

Executive member for performance and resources Cllr David Lloyd said: "Of the £28m deposited in Icelandic banks, £10m was with Landsbanki where one of the available ratings did not meet the criteria in our treasury management lending policy at the date of the deposits.

"We will want the review to establish how this happened and whether it will impact on any loss suffered by the council."

The county council has on average £300m on deposit every day in around 50 UK and foreign banks and does not represent reserves or money available for additional spending.