When the Icelandic banks collapsed in October 2008, 145 local authorities faced the prospect of losing deposits amounting to approximately £1.1bn. Three years on, the Icelandic Supreme Court handed down its judgment recognising the funds placed by local authorities (together with leading universities including Oxford and Cambridge and other UK wholesale creditors) as deposits with priority status over other creditors' claims. Priority creditors of Glitnir will receive 100% of the value of their claims and priority creditors of Landsbanki expect to recover at least 98%.
Leading public services law firm Bevan Brittan LLP were appointed to act on behalf of the Local Authorities as part of a collective action co-ordinated and led by the Local Government Association (LGA). Bevan Brittan also represents ten universities, one public sector organisation, and two UK corporations who also had wholesale deposits with the Icelandic banks.
We are delighted to announce that the Glitnir winding-up board has today (15 March 2012) paid to local authorities over £180m. The remaining sums due, which amount to around 18% of the local authority claims, are denominated in Icelandic Krona and are currently being held in escrow due to the current currency control restrictions. Those funds will be released to the authorities with the Central Bank of Iceland’s consent (which is currently being sought) under the arrangements the Central Bank of Iceland makes for allowing conversions of Icelandic Krona into sterling and other international currencies.
In January 2012, Landsbanki made its first distribution to priority creditors which included a payment of over £110 million to local authorities which represents a distribution of around one-third of the amount deposited. Further distributions are expected as and when the bank’s assets are realised.