LandsbankiI blogged previously about the Icelandic banking crash. You will recall that many local authorities across Britain were lured into placing huge sums of money (more than £1 billion in total) on deposit and were stunned when the crash happened. Originally, they thought all their money had been lost but some good news at last: Most councils that invested in the failed Icelandic bank Landsbanki have now recouped the majority of the money they are due after selling their claims, the Local Government Association (LGA) has said. 

The article from Public Finance says that authorities’ claims to deposits were sold at an auction as part of the winding-up proceedings for the Icelandic bank Landsbanki, now known as LBI. As a result, town halls will, on average, recover more than 95% of the money they originally deposited, the LGA said. Councils had £414m deposited with LBI at the time of the crash. Prior to the auction, around £225m had been recovered, while the auction will realise more than £140m.

The Public Finance article explains the reasons why councils sold their entitlements at an auction. But what I can’t understand is why anyone would pay good money for something that is uncertain. The reasons for selling the claims are given as removing councils from:

(a)   the process of the administration of the insolvent estate of Landsbanki, which was likely to continue for a number of years.

(b)   the risk of future currency fluctuations involved in claims, which is measured in Icelandic Krona.

As well as Landsbanki, Glitnir, Heritable and Kaupthing Singer & Friedlander banks collapsed.

The full story is here.

Martin Pollins

Managing Director at One Smart Place
Martin Pollins is a Chartered Accountant and MBA with wide experience in corporate finance and business management. He has served on the boards of several companies, including those listed on the London Stock Exchange, AIM and OFEX. He is Chairman and Founder of OneSmartPlace and was a Council member of the Institute of Chartered Accountants in England and Wales from 1988 to 1996. He was managing partner of PRB Martin Pollins, based in Sussex, the first Accountancy firm to advertise on British television.He went on to create and launch the CharterGroup Partnership (the UK’s first Accountancy network) and then LawGroup UK (at the time, one of the largest networks of lawyers in the UK). In recent years, he helped to raise several £millions to fund British films such as The Da Vinci Code, Bridge of San Luis Rey, Head in the Clouds and Merchant of Venice with actors such as Charlize Theron, Robert De Niro, Al Pacino, F. Murray Abraham. Kathy Bates, Gabriel Byrne, Geraldine Chaplin, Tom Hanks, Ian McKellen, Audrey Tautou, Penélope Cruz, Steven Berkoff, Lynn Collins, Jeremy Irons, Joseph Fiennes and many more.

He has written over 700 business publications (see Glossaries at http://onesmartplace.com/resources/glossaries/) and is editor of Better Business Focus (see http://onesmartplace.com/resources/better-business-focus-magazine). His Blog, on a wide range of subjects can be found at: http://onesmartplace.com/blog/
Martin Pollins

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