Page last updated at 16:08 GMT, Sunday, 12 October 2008 17:08 UK

Council boss defends 50m deposit

Kent County Council's decision to leave 50m in Icelandic banks when some local authorities withdrew their cash has been defended by its council leader.

Speaking on the BBC's Politics Show, Paul Carter said the council would not be changing its financial advisers.

Brighton and Hove City Council said it suspended transactions with one Icelandic bank about a year ago because of concerns about stability.

Mr Carter said review dates for deposits would have affected decisions.

About 100 councils in England, Scotland and Wales have deposits in collapsed Icelandic banks worth a total of 842.5m.

These are times where looking into the crystal ball and saying what is safe and unsafe is exceedingly difficult
Paul Carter, council leader

Kent has the largest sum of UK public money invested.

Its 50m is in Landsbanki, its UK subsidiary Heritable and Glitnir Bank.

Mr Carter said: "(We have) 500m worth of cash invested in 31 banking institutions around the world in a very volatile global financial market.

"Around 10% in Iceland - much of that money on six months' deposit or in some cases a year's deposit.

"Some of that Icelandic investment has a review date on October 24th.

"Some authorities that are saying they saw the warning signs may have had their review dates on September 24th.

"It makes a big difference in that cycle."

'Ratings good'

He added: "Let's accept that the credit ratings for those Icelandic banks were good when those deposits were made six months ago.

"Our advisors advised us that Iceland was not exposed to the toxic debt in North America from sub-prime property lending which I think gave confidence.

"In a very volatile market were is your money safe? Who would have thought that Lehman Brothers would have been in trouble six to eight weeks ago.

"These are times where looking into the crystal ball and saying what is safe and unsafe is exceedingly difficult."

Last week in a letter to the chancellor, Mr Carter said moving the 20bn worth of public sector money invested around the globe to British banks could boost liquidity.


SEE ALSO
Bank crunch 'may hit council pay'
12 Oct 08 |  Business
Councils 'not reckless with cash'
10 Oct 08 |  UK Politics
In full: Councils facing losses
09 Oct 08 |  UK Politics

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