WEST Devon Borough Council and Caradon District Council have reassured their ratepayers this week they are not among the 20 local authorities that have invested in Icelandic banks which collapsed in the global financial crisis.

However £5-million invested by Cornwall County Council in the Icelandic bank Landbanki could be in danger as the council has yet to know whether its investment will be guaranteed by the Government.

Cornwall County Council has £360-million in investments which are spread over a large number of institutions with high credit risks. In a statement, the council said it 'has a long standing and actively managed policy of spreading the risk for its investments across a wide range of organisations'.

Local authorities in the United Kingdom, who have invested in those Icelandic banks hit by the financial crisis, await a decision from Chancellor of the Exchequer Alistair Darling on what action would be taken by the Government to guarantee savings held abroad in these Icelandic banks.

Brian Higman, the county council's executive member for corporate support, said staff from its treasurer's department carried out a comprehensive check on the credit rating of Landsbanki before the investment was made in June 2008. At that time the bank had a high credit rating.

He said: 'This is a time of unprecedented market turmoil and we don't yet know the position with regard to our investment.

'This situation illustrates the prudence of the council's policy of spreading potential risk among a large number of investment opportunities.'

Although the Government has pledged guarantees for individual savers for up to £50,000 as yet no decision has been made on those investments by local authorities.

A spokeswoman for West Devon Borough Council's confirmed that the authority's savings were spread in two Irish banks — Irish Permanent and EBS — and six others in UK banks.

The council has a limit of £1.5-million on any investment. In the last Government assessment, West Devon Borough received the highest score of any council in the south west for the way it manages its finances and delivers value for money.

Head of finance Lisa Buckle said: 'Residents and staff should be reassured that the council is financially strong and exercises close control over its limited finances. Our priority and focus is always the return of our money, rather than the return on our money.'

Cllr Margaret Garton, chairman of the borough's strategies and resurces committee, said: 'The council is run to the highest standards of financial efficiency and probity. Every penny is looked after and is put to good use in providing quality services to our residents.'

A spokeswoman for Caradon District Council told the Times that all its savings were held in a UK bank.