Kent County Council (KCC) has urged public agencies to invest in British banks after it deposited £50m in troubled Icelandic banks.
The authority also called for UK Government assurances that public bodies' deposits would be safe.
In a letter to the chancellor, council leader Paul Carter said moving public sector and charities' investment to British banks could boost liquidity.
Kent has the largest sum of UK public money invested in Icelandic banks.
Its £50m is in Landsbanki, its UK subsidiary Heritable and Glitnir Bank.
On Thursday, Councillor Mike Eddy said £16m came from the staff pension fund, £8m was school reserves and £2m was Kent Fire Authority money that the council was administering.
"We believe this could provide a significant 'win-win' position for all concerned"
The rest of the £50m, which accounts for almost 10% of the council's investments, was made up of council tax and government grants, he added.
In his letter, Mr Carter said: "Our contention is that by working closely together, central and local government could redirect this sizeable level of cash investment into the British banking system.
"This could improve liquidity for these banks, on the basis that a suitable guarantee could be provided to local authorities.
"We believe this could provide a significant 'win-win' position for all concerned and demonstrate to the public that we are jointly doing all we can both to protect both our banking sector and local taxpayers' money."
Of the £463m that Kent County Council has invested, some £163m is invested abroad in the "highest rated" organisations.
Police investment
Mr Carter said the experience with Icelandic banks proved that the perceived wisdom of diversifying risk by investing in high-rated organisations could no longer be relied upon.
"This is not a matter of individual or local government competence, but an issue of national and international conditions," he added.
Kent Police Authority has also announced it had £11.1m invested in Icelandic banks.
Chief Constable Mike Fuller told BBC Radio Kent on Friday, it would not affect policing in the county.
"I will be offering every support of Kent County Council and Kent Police Authority in getting that back.
"The main thing for us is it hasn't affected and won't affect the routine business. It's business as usual, but obviously we look to recover that money."
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