North East Lincolnshire Council has been accused of negligence by the Audit Commission over its handling of investments in Icelandic banks.
The authority put a further £4.5m into the country's banking system days after its credit ratings were downgraded.
A spokesman for the Audit Commission said the council should have been more cautious in its approach.
The council's chief executive Tony Hunter said the use of the word "negligent" was emotive.
North East Lincolnshire Council said disciplinary action had been taken and lessons learned over the investments.
Steve Bundred, of the Audit Commission, said more care should have been taken when warnings were issued.
He said: "It was widely known by the end of September that the Icelandic banking system was in crisis.
"This was several weeks after the collapse of Lehmann Brothers that triggered the global banking crisis, and councils should have been much more cautious at that point."
The authority's chief executive, Tony Hunter, said the banking crash in Iceland had been a salutary lesson for the council.
He said: "What the Audit Commission's report does is rightfully and helpfully draw attention to what we and a number of other councils across the country need to get right."
And he added: "Negligent is an emotive word, but we are not getting involved in a battle about the use of that word."