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KCC is one of more than 100 local authorities in the UK to
have deposits in three Icelandic banks. These have now gone into
receivership. Here we explain how KCC manages the funds it holds in
order to get a good return but with a minimum risk.
In common with all local authorities, we have working capital
balances which we deposit for varying periods in financial
institutions.
The emphasis is on protecting the money invested, so deposits
are widely spread across 31 banking institutions.
The deposits made in these three Icelandic banks were based on
the strength of the assessment from the independent rating
agencies.
Deciding which banking institutions to use
KCC operates within all the rules relating to the deposit of
council funds and full risk assessments are always carried out. We
very regularly review which banking institutions we use.
We have regular meetings with Butlers, our advisers. They help
us form a view as to which banking institutions KCC should place
deposits with. Butlers provide this service to many local
authorities. They use the three main independent financial rating
agencies to inform their views.
KCC's deposits in the three Icelandic banks
As at 7 October we manage £482 million, including £16 million of
Fire funds and £145 million of Pension Fund money.
The money we had deposited with the three Icelandic banks
totalled £50 million out of a KCC budget of £2.6 billion and
Pension fund of £2 billion. The money was deposited as follows:
- 3 investments with Glitnir totalling £15 million
- 4 investments with Landsbanki totalling £17 million
- 6 investments with Heritable Bank totalling £18
million
Across the country many local authorities have deposits with
these banks totalling an estimated £1 billion.
Recovering our money
Glitnir and Landsbanki have been taken over by the Icelandic
government. Heritable, which is Icelandic-owned but based in the
UK, has gone into receivership.
With the action being taken by the Icelandic government there is
a good chance that we will recover our deposits, which were due to
be repaid at different points during the next year.
We are also supporting the Local Government Association in its
discussion with central government to seek a solution in protecting
the local government family with regard to these investments.
Financial control
We have rigorous financial controls in place which are regularly
reviewed by internal and external auditors. Our Treasury Strategy
is agreed as part of the annual budget
process. |