Page last updated at 16:42 GMT, Tuesday, 25 January 2011
Councils' Icelandic bank cash battle continues
Glitnir bank
Both councils invested 2m in Glitnir bank

Both of Mid Wales local authorities are still fighting a legal battle to recoup millions of pounds from Icelandic banks.

Ceredigion and Powys Councils between them invested £9.5m in three Icelandic banks before the collapse of the country's financial system in 2008.

But so far they have between them been paid back only five per cent of the total investment.

They are aiming to recoup funds through the Local Government Association.

Local authorities around the UK had more than a billion pounds invested in Icelandic banks.

The local authorities would be wise to take a conservative view and fear the worst because the money, when it is returned, will be over a long time period
Ken Richards

Up to 14 January 2011, Ceredigion Council had received a total of £521,758.24 which represents just over half of the £1m it invested with Heritable Bank.

Legal action was not taken against the UK registered Heritable Bank because it is subject to British insolvency laws.

A Ceredigion council spokesman said the estimated recovery of funds from this bank would be £0.85m.

But both councils, under the umbrella of The Local Government Association, have taken legal action against two other Icelandic banks, Landsbanki and Glitnir, and have so far not recouped a penny.

Landsbanki logo
Ceredigion Council invested 2.5m in Landsbanki

The councils hope they will be confirmed as preferential creditors by a district court in Reykjavik in February 2011.

This means they will be able to claw back more money from the two banks.

A Ceredigion Council spokesman said that if preferential creditor status is confirmed the council would recover £2.375m or 95 per cent of the £2.5m investment in Landsbanki

But if the council do not get preferential creditor status then it will only be able to claw back £0.95m or 38 per cent of the initial investment.

Recovery

The Ceredigion spokesman added that if preferential creditor status is granted regarding Glitnir bank it is estimated the local authority will get all of its £2m investment back.

But if preferential creditor status is not granted it will only be able to recoup £0.58m or 29 per cent of its initial investment in Glitnir.

Powys Council had invested £2m in each of the two banks.

A Powys council spokesman said: "Landisbank has agreed that local authorities are preferential creditors, but that view has been challenged by other investors.

"Glitnir has ruled that local authorities are not preferential creditors and that has been challenged by local authorities.

"The county council is optimistic that it will recover 100 per cent from Landisbank and close to 100 per cent from Glitnir."

A spokesman for the Local Government Association said that court hearings were scheduled to start in February 2011.

Páll Benediktsson of Landsbank said the case could reach Iceland's Supreme court before the middle of this year.

He added: "Various things can change this and delay the case, and one can never be sure of how the courts behave in this or other matters."

Ken Richards, former senior lecturer in economics at Aberystwyth University, said: "The local authorities would be wise to take a conservative view and fear the worst because the money, when it is returned will be over a long time period.

"There may be losses in interest as well as the initial investment to consider."




SEE ALSO
Arrest of Landsbanki executives
14 Jan 11 |  Business
Council recoups Iceland bank cash
27 Oct 10 |  Nottingham
Icelandic banks
25 Oct 08 |  Moneybox
'Complacency' over Iceland banks
08 Apr 09 |  Mid Wales


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