Councils are one step closer to recouping the cash they lost in the Icelandic bank collapse, after the announcement that one bank would return 80% of investments. Administrators for the Heritable Bank, the UK arm of Landsbanki, made the announcement earlier this week. However, a second bank, Kaupthing Singer and Friedlander (KSF), looks set to offer just 50% of investments. A spokesman for the Local Government Association (LGA) said the announcements were ‘great news' for councils waiting for the cash to be returned. ‘We will keep on fighting to get as much money back for our members as possible,' he added. The situation with the Icelandic branches of the bank is still unclear, but councils have ‘preferred creditor' status and the LGA has claimed it still hopes to get the ‘lion's share' of the cash returned. LGA chairman, Margaret Eaton, said the news would be a relief to council taxpayers. ‘It is clear that some aspects of treasury management need to be done differently in the future.' But, she added: ‘Money from council investments has generated hundreds of millions of pounds which has gone into keeping council tax down and providing frontline services to local residents. ‘It is in everyone's interests that councils continue to invest and ensure that they are doing so prudently.' The Audit Commission, which itself had deposited £10m in Icelandic banks, previously said most councils had ‘heeded warnings' about the declining creditworthiness of Icelandic banks during 2008 and taken action accordingly. However, it has said that some did not do this, describing seven as behaving ‘negligently'. The seven were: Havering LBC Kent CC Redcar and Cleveland Council Restormel BC Bridgnorth DC North East Lincolnshire Council South Yorkshire Pensions Authority
