The councils are calling for government to underwrite all losses
Councils across Oxfordshire stand to lose more than £28.5m of investments in ailing Icelandic banks, it has emerged.
West Oxfordshire District Council could be one of the hardest hit in the county and faces a £9m loss if the banks fail.
The government is coming under pressure to guarantee all council funds as it has done with private savings.
The councils said the money represented a small proportion of their budgets and were confident they had sufficient funds to tide them over.
Meanwhile Thames Valley Police Authority confirmed it has a 364-day £5m loan deposited with one of the affected banks Landsbanki, which is due for repayment in May 2009.
The authority said it did not expect any short-term impact on front line policing and discussions were continuing.
Iceland is in the throes of a banking crisis and the Local Government Association, which represents councils in England and Wales, said it had identified more than 70 local authorities believed to have deposits in the country's banks.
DEPOSITS IN ICELANDIC BANKS
West Oxfordshire District Council: £9m
Cherwell District Council: £6.5m
Oxfordshire County Council: £5m
Oxford City Council, £4.5m
South Oxfordshire District Council: £2.5m
Vale of White Horse District Council: £1m
Thames Valley Police Authority: £5m
They are believed to have more than £1.3bn invested in Icelandic banks in total.
It is common practise to spread a number of investments in different banks to maximise returns and minimise risk.
Councillor Margaret Eaton, chairman of the LGA, said: "We are seeking an assurance from the chancellor that councils' assets will be protected in the same way as personal assets.
"Councils' experience of ensuring stability in a financial crisis will mean that they will keep vital frontline services running through thick and thin and this situation is no different.
"Prudent financial management means that councils put their money into a diverse range of banks to make sure that any risk is spread to minimise the impact of problems in the financial markets," she added.
Councillor Charles Shouler, from Oxfordshire County Council backed this assertion.
He said: "We obviously want this £5m back but it is only a small part of our overall budget of around £1bn.
"It is unlikely that there would be any effect on services because we would have to absorb the loss by taking it from the reserves we carry precisely to cover such emergency situations."