Friday, 2 May 2014

Icelandic bank saga concluded

North Ayrshire Council’s 6 year wrangle with two collapsed Icelandic banks is finally at an end.

The local authority’s ruling SNP Cabinet will this week hear that all-but £1.9m of a £10m deposit with the former Glitner Bank has been repaid. The balance is currently held in an Icelandic escrow account (an account administered by a third party, with funds disbursed once certain contractual arrangements have been agreed). However, due to differing interest rates – at the time of the bank’s insolvency compared to dates on which funds were returned – it may be that North Ayrshire Council could receive an overpayment of around 2.2%. Council officials will tell the SNP Cabinet that it is not yet clear whether or not return of any overpayment will be sought by Icelandic authorities.

Officials will also brief councillors on a decision to sell the £2.3m debt still owed by a second Icelandic bank – Landsbanki – to North Ayrshire Council. The local authority had originally deposited £5m with the bank, but £2.7m was returned between 2012 and 2013.

A report for the Cabinet explains that, with the agreement of the Council’s SNP leader, Willie Gibson, officers sold the outstanding debt through a competitive auction process. In total, the Council finally secured almost 96% of the initial £5m deposit. Had the local authority not sold-on the Landsbanki debt to a third-party, it would have been 2019 before funds were returned to North Ayrshire.

The decision by the previous Labour administration of North Ayrshire Council to ‘invest’ £15m in ‘high-interest’ accounts operated by foreign banks has been severely criticised. The Icelandic accounts have since been described as ‘too good to be true’, which, it has been claimed, should have rung alarm bells. The overseas ‘investments’ put North Ayrshire’s money beyond the jurisdiction of UK financial regulations.

Glitner and Landsbanki collapsed in 2008.

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