Council has £5m in Iceland banks

Ipswich Borough Council has spread its investments "to minimise risk"

A Suffolk council which has £5m in Iceland banks is seeking a government guarantee for the deposits.

Councils with millions invested in troubled banks are asking the government for the protection it has promised to personal savers.

Ipswich Borough Council said it had funds in two Icelandic banks, which total 12% of its investments.

It said it was watching the situation and it did not expect there to be any affect on services in the county.

An Ipswich Borough Council spokesman said: "This (the deposits) represents about 12% of our total investments, which are spread widely to minimise risk," a spokesman said.

"At the time of investing in Iceland, both banks had a top credit rating.

"There is no indication at present that any other part of our investment portfolio is at risk but we are monitoring the situation constantly.

"This is a cause for great concern, obviously, to many local authorities across the country but we don't expect it to have any impact on services in Ipswich.

"We are lobbying the government directly and working with the Local Government Association in a bid to extend the guarantee given to personal investors to local authorities.

"One solution could be that we reduce our contribution to the NNDR (National Non-Domestic Rate) pool to cover any future losses but we want to stress that the banks concerned have not defaulted."

Prime Minister Gordon Brown said he was considering "further action", but the government is not offering to guarantee authorities' deposits with Icelandic banks.