More than 20 councils are thought to have invested in banks in Iceland
The Tories and Lib Dems are urging ministers to "clear up the uncertainty" about hundreds of millions of pounds councils invested in Iceland's banks.
Chancellor Alistair Darling has protected Britons' savings in banks which are now in default.
But at least 20 councils in England and Wales are known to have deposits in Landsbanki - some of tens of millions.
For the Tories, Eric Pickles said local government finances were at risk as they were not covered by the guarantee.
Kent County Council alone has £50m in Iceland-based banks, while Westminster City Council revealed it had deposits totalling £17m.
Sutton Council in south London confirmed it had exposure totalling £5.5m, and Havering Council in east London said it had investments worth £12.5m.
North Lincolnshire Council has £2m invested with Landsbanki and £3.5m in the firm's UK bank, Heritable. North East Lincolnshire Council said it had £2.5m on deposit with Landsbanki.
Hertfordshire County Council has £17m invested, while Buckinghamshire has £5m - the same sum as Cornwall County Council.
The Local Government Association (LGA), which represents councils in England and Wales, says it has identified more than 20 councils which are believed to have deposits in Landbanksi or Heritable.
It is still trying to work out the sums involved but believes councils had in the "single figure millions of pounds" but others had deposits "running into the low tens of millions".
The Conservatives say their own research has identified at least one London council that had banked £40m, one in the South East which had a £30m deposit and others with £20m or £25m.
The LGA says it does not expect "significant financial problems" in the short term as town halls put money in a wide range of institutions and vital frontline services should not be affected.
My number one concern though is to make sure we protect individual savers
But it wants the same protection as private savers, saying money had been prudently managed in line with the government's own guidance.
LGA chairman Margaret Eaton said: "We are today seeking an assurance from the chancellor that councils' assets will be protected in the same way as personal assets. Town halls invested in Landsbanki as a reputable bank with a solid credit rating.
"In the short term, these councils are confident that they will have sufficient funds to tide them over for a considerable period of time."
For the Lib Dems Julia Goldsworthy said there was an "urgent need for clarification" and urged the government to "make clear how local authority funds will be protected".
"Ultimately this is council tax payers' money at risk and these are funds which are essential for the delivery of local services," she said.
For the Conservatives Mr Pickles said no council could have foreseen the collapse of Iceland's banks and said people would be worried about their council tax bills and local services.
Earlier in the Commons, he asked the chancellor whether he was "wholly content" that councils' investments would not be covered and the burden "should now fall on council tax payers".
The chancellor replied that he was aware of the problem and it was something he would look at. But he added: "My number one concern though is to make sure we protect individual savers and I'm sure we are at one on that."