Page last updated at 11:42 GMT, Wednesday, 15 October 2008 12:42 UK

Universities' 8m Icelandic woes

Landsbank branch in Iceland
Three Welsh universities have funds frozen in Icelandic institutions

Three Welsh universities have 8.1m at risk in the Icelandic bank crisis, it has emerged.

They are Glyndwr University in Wrexham, the University of Wales and Aberystwyth University.

A spokesman at Aberystwyth said 4m in two Icelandic banking subsidiaries was a "relatively small part" of the university's investment portfolio.

Glwyndwr said the 3m involved was earmarked for capital projects but would not affect day to day operations.

It brings Wales' public sector exposure in the crisis to 74m, said Finance Minister Andrew Davies.

Initially he said eight councils had 56m in Icelandic institutions, which was later corrected to nine and 60m. Three police authorities have 10m.

Mr Davies said neither Wales' NHS or further education sector appeared exposed.

In a statement released by the assembly government, he said majority of the deposits by the councils, universities and police authorities were with the Icelandic bank Landsbanki, which has been nationalised by the Icelandic government and Heritable, a subsidiary of Landsbanki.

This is not an overseas investment and we fully expect this situation will be resolved through administration
Glyndwr University, Wrexham

Glyndwr University, which was known as North East Wales Institute or Newi until July, has had up to 3m money in Kaupthing Singer & Friedlander, a bank registered in the UK by an Icelandic parent company.

The cash has been earmarked for building projects at the institution, which is Britain's newest university.

A spokesman said: "Glyndwr University prides itself in its strong financial management strategy, and operates a virtually zero-risk approach to its investment portfolio, making deposits only in AAA-rated UK banks.

"This is not an overseas investment and we fully expect this situation will be resolved through administration.

"While these funds have been earmarked for capital projects on the campus, we stress that this unfortunate event will in no way affect the day-to-day operations of the university.

"We remain financially strong, having for the seventh year in a row produced a healthy surplus on our end of year accounts in 2007/08."

Aberystwyth University said the situation would not affect its operations "in any way".

In a statement, it said: "Aberystwyth University has a wide portfolio of investments. It holds investments of around 2m in each of two subsidiaries of Icelandic banks. These represent a relatively small part of the university's cash investments."

'No compensation'

Mr Davies said ministers in Cardiff were working with their Westminster counterparts and the Welsh Local Government Association (WLGA) to unfreeze the accounts.

He said the Wales Council for Voluntary Action had confirmed that few Welsh voluntary sector organisations were likely to be affected and those that were would be protected by the compensation scheme guaranteeing the first 50,000 in any account.

Mr Davies said no public sector organisation had so far contacted the assembly government to say it had found itself in short-term difficulties.

He said public sector organisations could ask him for help but not for compensation.

He said: "I would expect a prudently managed organisation to be able to navigate its way through the current difficulty - as indeed very much looks to be the case.

"Any prospect of compensation would clearly be very detrimental to the efforts being made to get the frozen investments returned."

Liberal Democrat Jenny Randerson accused the assembly government of having been "slow to wake up to this issue and are clearly still complacent".

Ms Randerson said ministers had "no firm plans of how they will bridge the funding gap for some local authorities" and councils would have less funds than they were expecting.

"Many local authorities have partnerships with private sector companies and the Labour-Plaid government does not seem to have done any assessment of whether any in Wales are affected, despite the fact that this could have a significant impact on local authority plans."

Local Government Minister Brian Gibbons will attend a meeting in London on Wednesday along with a WLGA representation to discuss the financial situation.


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