EPPING Forest District Council has confirmed that it has £2.5m invested with the Heritable Bank, a subsidiary of the Icelandic Landsbanki Group.

And at the present time it is not known how much of the money it will be able to recoup.

A council spokesman said: “As a debt-free council, Epping Forest has a large amount of savings and investments used to support the cost of services and keep council tax down.

“While the news from Iceland is not good, the amount of money involved is small in comparison to the council’s overall investments which have been spread across a wide number of banks to limit the impact of problems in such circumstances.”

The district council is one of a number of unsecured creditors and the amount of the deposits that will ultimately be returned is unclear.

The Local Government Association is currently lobbying to achieve the same level of protection for local authorities as has been given to ordinary savers.

The council has a Treasury Management Policy, formulated in line with Government guidance, which restricts the amounts that are deposited with various financial institutions based on their credit ratings.

At the time the deposits were made with the Heritable Bank, the bank had a good credit rating, the spokesman said.

Finance and performance portfolio holder Chris Whitbread said: “Thankfully, we have not put all our eggs in one basket.

“We are currently in an extraordinary economic environment where instablity in financial markets has generated unpredictable events.

“However, Epping Forest District Council has very prudent investment policies. It is too early to say what the exact effects of Heritable Bank being placed in to administration will be.

“These will ultimately be determined by the success of failure of the LGA campaign and what dividend is available to creditors at the end of the administration but the council remains financially strong and well managed.”

The council’s investments will be discussed at a special cabinet meeting - which will be webcast at www.eppingforestdc.gov.uk - at 6pm on Monday, October 20.