Tuesday, 4 February 2014

Cornwall Council recovers money invested in failed Icelandic banks

Cornwall Council has sold its claims against the insolvent estate of Landsbanki. This means that the authority has now recovered 93% of the £9m that was originally deposited with Landsbanki in 2008 by the former Restormel and County councils and is no longer a creditor of the bank.

The claims were sold through a competitive auction process.  The price at which the claims were sold was based on a reserve price set by the Cabinet on the basis of legal advice received from Bevan Brittan, the solicitors commissioned by the LGA to work on behalf of all local authorities to lodge a claim on the estate, and financial advice procured by the Local Government Association, independent treasury advisors and its own professional analysis of the financial position.

The proceeds of the sale were paid in cash in Pounds Sterling and these funds have already been received by Cornwall Council. As a result the Council has recovered the majority of its Landsbanki deposits in pounds sterling now rather than run the risk of receiving funds over an unknown number of years into the future with the added uncertainty around exchange rates. A large number of other councils which had invested in failed Icelandic banks took the same route and all those authorities have received the same basic settlement rate as Cornwall Council did.

I am delighted that Cornwall Council has been able to resolve our Icelandic investments. The Cabinet took the view that being able to resolve the matter now was worth the small discount on the total amount of the original investment. Had we ignored this opportunity then we would probably have had to wait for a number of years and run the risk of receiving our investment back in a range of currencies meaning that we still would not have been able to recover the full sterling amount.

The Cabinet agreed a reserve price which has been met and which we feel provides good value for money for the Council and our taxpayers. I am very grateful to our own finance team and to our independent advisors and the LGA and Bevan Brittan for all their help.

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