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Iceland Pays Back £47m Debt To Scottish Councils, Says Debt Management Company Scottish Trust Deeds

Scottish council investments feared lost in the Icelandic banking system collapse four years ago have almost been paid back in full, says debt management company Scottish Trust Deeds.

Attracted by high rates of interest, Scottish Authorities watched nearly £50m invested in Icelandic savings accounts disappear overnight as the banking industry went to the wall, yet in just four years the banks have managed to pay back the vast majority of what they owed Scotland.

Despite repeated warnings that Iceland’s credit rating was being downgraded, eight Scottish councils kept investing until the industry’s main banks suddenly collapsed in October 2008 and £47m of tax payers money was frozen. Scottish Borders, considered the smallest council in Scotland, invested the highest amount of all the councils at £172m. The Local Government Association and local authority umbrella group Cosla campaigned hard to ensure councils would be among the preferred creditors when liquidators began making payments out of bank assets.

Cameron Buchanan, Iceland’s honorary Scottish consul in Edinburgh, said: ““They have pulled themselves up by their bootstraps. The recovery is really remarkable. The banking crisis made them more and more determined to pay everything back. They were genuinely horrified when the British government asked for them to be treated like a terrorist state.”

“Fishing is very buoyant, protected by a 200-mile exclusion zone which they guard quite vigorously. And they are not pushing as hard as they used to get into the Eurozone – for obvious reasons.”

Iceland is keen that the Icelandic people should get the credit for the remarkable recovery, as it is their actions that has allowed the banks to keep much of the value of their assets intact. Unlike many economies in the Eurozone that will contract by around 0.3% in 2013, Iceland’s is set to grow by 2.7%. Part of this is due to devaluation of the currency which allowed expensive luxury goods to be purchased cheaper, and Icelandic businesses have taken on more staff, resulting in unemployment levels falling by half since the height of the banking crisis.

One council, South Lanarkshire, has been paid half of the £7.5m it lost with Landsbanki and Heritable bank. “The winding up of the banks is ongoing and the council has received payment to date of £1.9m from Heritable Bank, and £2.4m from Landsbanki,” said a spokesperson for the council. “The council’s accounts have assumed recovery of 100 per cent of the funds from Landsbanki and 88 per cent of the deposit from Heritable. However, work continues to secure the maximum recovery of funds from both banks.”

A spokesperson from debt management company Scottish Trust Deeds said: “This is good news for Scottish citizens, who would have been forced to endure the gaps in services that the permanent loss of the money would generate. Some of the liquidators from the Icelandic banks have promised that all of the debts will be paid, which is amazing and a real testimony to the grit and determination of the Icelandic people.”


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