1 April 2011
Local authorities that invested in Iceland’s collapsed banks have gained priority status as creditors, potentially saving them £400m.
A ruling by Iceland’s district court means that deposits placed by UK wholesale depositors will now have priority in the winding up of the Landsbanki and Glitnir banks.
Councils had feared that they would be left in the queue behind other creditors, potentially losing most of their money.
The deposits were placed in the mid-2000s when the Icelandic banks were offering unusually high rates of interest. They then failed in the 2008 banking crisis.
Local Government Association chair Baroness Eaton said: ‘Securing priority status in the administrations of Landsbanki and Glitnir could save council taxpayers across the country as much as £400m.
‘This judgment means that councils’ claims….will be at the front of the queue when it comes to getting their money back.’
The LGA co-ordinated legal action in Iceland for the councils involved. Baroness Eaton said its legal costs to date amounted to less than 1% of the money it now expected to recover.
