Victory for LAs in Icelandic Banking Case

News that the Icelandic Supreme Court has upheld a ruling that local authorities were indeed depositors in Icelandic banks and therefore should be prioritised over other creditors, such as bond holders, has been met with great relief at councils across the UK.

Glitnir and Landsbanki will pay a reported 100% and 98%, respectively, of the deposits made by local authorities prior to the collapse of the Icelandic banking system in 2008. This news draws a line under a lengthy legal battle which was coordinated by the Local Government Association (LGA).

Sir Merrick Cockell, Chairman of the LGA said: “This is a £470m victory for councils and local residents. Securing priority creditor status in the test cases means the 145 local authorities with investments in the Icelandic banks are likely to recover almost all of the more than £1bn they had on deposit with the four Icelandic banks. Losing this case would have been a huge financial blow. This is a great relief.

“Today’s outcome is the culmination of more than two years of extremely hard work and brings the total estimated recoveries on behalf of the sector from Landsbanki and Glitnir to £624m – or 98% of the total on deposit. We are grateful to our legal team and the councils who brought their cases forward.”

Cllr John Simmonds, Cabinet Member of Finance for Kent County Council (KCC), one of the authorities who spearheaded the campaign paid tribute to Nick Vickers, KCC’s head of financial services, who, Cllr Simmonds said, “has played a leading role in the negotiations on behalf of the 123 UK local authorities which had money deposited in Icelandic banks.”

According to one local authority treasurer the challenge would now be, “finding suitable investments” for the sums they are about to recoup.