Authorities’ claims to deposits were sold at an auction as part of the winding-up proceedings for Landsbanki, now known as LBI. As a result, town halls will, on average, recover more than 95% of the money they originally deposited, the LGA said. Councils had £414m deposited with LBI at the time of the crash. Prior to the auction, around £225m had been recovered, while the auction will realise more than £140m.
The LGA stated that selling the claims removed councils from the process of the administration of the insolvent estate of Landsbanki, which was likely to continue for a number of years. It also removed councils from the risk of future currency fluctuations involved in claims, which is measured in Icelandic Krona.
However, some authorities did not sell their rights. The LGA said it would work with lawyers Bevan Brittan to help these councils continue their claims against LBI.
In total, UK councils had more than £1bn deposited in the four failed Icelandic banks at the time of their financial collapse in 2008. As well as Landsbanki, Glitnir, Heritable and Kaupthing Singer & Friedlander banks collapsed. Although recovery rates will differ for individual councils, the sector is expected to recoup considerably more than 90p for every £1 put into the four institutions.
LGA chair Sir Merrick Cockell said: ‘This settlement has enabled a number of councils to fast-track their recovery of money from LBI and avoid any risk of further loss.
‘From day one we have always been clear in our determination that local government would fight to recover the lion’s share of the money deposited in Iceland at the time of the crash. Councils had just over £1bn deposited in the four failed Icelandic banks at the time of the collapse in 2008. Following this settlement the total amount recouped by local authorities is expected to be £1bn. We can justifiably say that the tenacious efforts of local government working together to get this money back have paid off.’
