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Local councils recover final £5m after Icelandic banking crash

Bevan Brittan aids in release of money trapped in escrow accounts following banking crisis

12 October 2015

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The final tranche of money lost by local councils in the Icelandic banking crisis seven years ago has at last been recovered.

In total, £1.05bn in deposits was lost by councils in England and Wales in 2008. The majority of that amount had already been recouped prior to the latest recovery.

Councils lost their savings when the Icelandic banks Landsbanki (LBI), Glitnir, Heritable, and Kaupthing Singer & Friedlander collapsed.

Most of those councils affected took action via the Local Government Association (LGA) and, following a legal battle in Iceland, they were awarded 'priority creditor status' in 2013, allowing them to recover most of the lost money from Glitnir, Heritable, and Kaupthing Singer & Friedlander.

Funds previously held by LBI took longer to recoup, however. Councils eventually sold their claims against LBI by auction, with the money guaranteeing the councils more than 95 per cent of the funds deposited with the bank.

Now, though, a final outstanding amount of over £5m has been secured by more than a dozen local authorities, bringing to an end their involvement with the Icelandic banks.

On the basis of legal advice received from the law firm Bevan Brittan, Icelandic krona owned by those councils, but trapped in an escrow account in Iceland, has been sold to Deutsche Bank.

The proceeds of the sale were paid in pounds sterling, and bring to a close a lengthy legal action in respect of the insolvent estates. Each authority involved in the process received the same price.

Bevan Brittan's lead partner, Virginia Cooper, said: 'We are very pleased that almost all the public money that was feared lost in the Icelandic banking crash has now been recovered.

'This brings to an end a long running saga - and is a significant achievement for local government working together in a combined legal initiative.'

John van der Luit-Drummond is deputy editor for Solicitors Journal | @JvdLD

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