Finance chiefs ignored warnings over Icelandic banks
PUBLISHED: 11:41 03 April 2009 | UPDATED: 16:04 07 September 2010
Sanchez Manning CITY Hall finance chiefs ignored warnings and continued to pour millions of pounds of taxpayers money into Icelandic banks, the Wood&Vale can reveal. Conservative-run Westminster Council invested more than £80million of public funds into
CITY Hall finance chiefs ignored warnings and continued to pour millions of pounds of taxpayers' money into Icelandic banks, the Wood&Vale can reveal.
Conservative-run Westminster Council invested more than £80million of public funds into Iceland, even though it had been advised the country's banks were unstable.
In April last year Fitch, an agency which assesses financial institutions, put Iceland's three biggest banks on a negative rating watch.
More than half of the UK's local authorities heeded this danger sign, investing elsewhere in safer places.
But Westminster continued depositing - something confirmed this week by spending watchdog the Audit Commission.
Under a freedom of information request, the Wood&Vale discovered Westminster ploughed £86,300,000 into Icelandic banks Kaupthing, Singer & Friedland, Heritable Bank and its parent company Landsbanki between April and August 2008 - after the warnings were given.
The financial blunder led the council to forfeit £17million of taxpayers' money. Opposition councillors at City Hall say the huge loss has squeezed already tight budgets at a time when the council is cutting spending because of the recession.
Cllr Paul Dimoldenberg, leader of the Labour group, said: "It's been a tale of total financial incompetence for which Westminster taxpayers are paying the price in cuts to services, hundreds of jobs lost and misery for many families.
"People in the Tory group should hang their heads in shame and those responsible, including the leader of the council, should resign."
Mark Wallace, from pressure group the Taxpayers' Alliance, also called for heads to roll.
He said: "It's disgraceful that Westminster continued to put money in Icelandic banks even after professionals in the finance field warned about the serious risks.
"Plenty of other organisations, including councils, managed to get out in time and did not continue taking such risks with their money. Financial officers at the council are paid large amounts of money because they are supposedly good at their job, so whoever is responsible for this disaster should be facing the sack."
But finance boss Cllr Melvyn Caplan refused to shoulder any blame for the blunder, saying his department had only been following government guidance.
He said government advice to councils was to invest in institutions on the basis of their credit ratings. He added that although Landsbanki had previously been put on a negative rating watch, in May 2008 Fitch confirmed the rating of the bank as A grade.
"This proves that there were communication going on all the time," he said. "The rating never changed and the government advice is to pay attention to the credit ratings."
But local Labour MP Karen Buck said these claims were "nonsense".
"This explanation is clearly ridiculous because otherwise every other local authority would be in the same position," she said. "We had the audit commission report that said some council's were foolhardy in their choices and Westminster may not be in that category but they certainly did not heed the amber light sent out.
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