Scottish Borders Council (SBC) has welcomed an Icelandic Supreme Court decision which should allow the local authority to claw back the majority of the £10million it lost in the Nordic country’s banking collapse three years ago.
Had the decision gone against SBC, the authority would be facing a loss of £2.9 million.
Together with around 100 other local authorities and organisations in the UK which lost close to £1billion when the Icelandic banking sector went into meltdown, SBC are classed as preferential creditors by that country’s courts after a legal appeal against this status - launched earlier this year by a group of non-preferential creditors led by Germany’s mighty Deutsche Bank - failed.
The court decision, which found in favour of Kent County Council, means SBC should be able to recoup the majority of the £5m it had deposited with the Landsbanki bank. However, the council says it is still awaiting confirmation the court ruling will apply to non-test cases.
SBC’s depute leader (finance), Councillor Neil Calvert, said: “The news that local authority deposits are being regarded as preferential is very welcome and will minimise the impact on the Borders taxpayer to the level already provided for in the 2010/11 annual accounts.”
The Icelandic Supreme Court found in favour of UK public bodies last week, in a test case relating to deposits which were invested in Landsbanki.
SBC had £5million deposited each in Iceland’s Heritable Bank and Landsbanki in 2008 when the country’s banking sector crashed. It has since submitted respective claims of £5.042million and £5.127million, and to date, has managed to claw back over half its cash from Heritable Bank – and anticipates ultimately collecting almost 85 per cent of the lost cash.
No payments have yet been received from Landsbanki, but, with its preferred status confirmed, SBC will be paid first, along with other UK public bodies, and expects to recover almost all of the money it had on deposit with Landsbanki.
The Scottish Government has allowed SBC to borrow the £1.021million needed to cover the shortfall, which the council is currently paying back at a rate of £4,000 per week over five years.