But Councillor Milner Whiteman, chairman of the local authority’s finance and resources committee said this week: “It will have no effect on services and council taxes.
“I was concerned when I was first told what had happened, but I am very hopeful we will get the money back.”
He confirmed that regular credit checks had been made by the council on Landsbanki and that Westgate had been given approval by the Treasury to open the account. “We were very careful where we put the money,” he added.
A council spokesman stressed that the Westgate authority remained in a strong financial position, despite the uncertainty surrounding the £1m deposit.
“The ongoing delivery of our services will be unaffected and we are working closely with the Local Government Association, who are in ongoing discussions with the administrators and the Government,” he explained.
“The council’s investments are made in accordance with good practice prescribed in guidance produced by the Chartered Institute for Public Finance and Accountancy and deposits are only placed with financial institutions following advice from credit rating agencies.
“Given the current economic climate, we have increased measures to minimise our exposure to financial risk by limiting individual investments to a maximum of £1m.
“We understand that the Local Government Association has now called for a Government inquiry, led by the Financial Services Authority, into how credit ratings agencies continued to give Icelandic banks high credit ratings, right up until a matter of days before they went into receivership or administration.”
The Government announced on Wednesday that an emergency team of finance chiefs is on standby to help local councils hit by the collapse of Icelandic banks. An estimated 108 councils have deposited almost £800m in Icelandic banks.
It was also revealed this week that South Shropshire District Council had £1m in another Icelandic bank but decided in July to take the money out because of concerns about the worldwide economy. Neighbouring Wyre Forest District Council, which had £9 million in Iceland, has been told it will be among the first authorities to receive help from a government emergency team.
