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Local councils criticised for banking procedures

In the aftermath of the collapse of the Icelandic banking system a cross-party committee of MPs has severely criticised local authorities across the UK. Those who followed the story will be aware that hundreds of millions of pounds had been deposited in Icelandic banks, where the rate of interest was significantly better than that available in the UK, over the last few years. Indeed, even after the initial warning that the Icelandic system was on the verge of collapse, a number of council still sent further funds to their Icelandic accounts.

The Parliamentary committee highlighted a number of shortfalls in the local council warning system and the fact that basically a number of councils ignored concerns about the Icelandic system. It has taken a multibillion-pound loan from the Dutch and UK governments, to the Icelandic authorities, in order for a compensation scheme to be put in place. However, as yet there are no definitive dates as to when compensation will be paid.

While it is quite right for local authorities to deposit their significant funds across a variety of different accounts, the fact that they chased the Icelandic bank accounts because of interest rates that were higher than those in the UK should have rung alarm bells from day one.

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