Council sticks with the Rock

Oct 10 2008 by Les Stewart, Perthshire Advertiser Friday

IN addition to the £1 million investment in the Icelandic bank Glitnir, Perth and Kinross Council also has £1.7 million lodged with the recently-nationalised Northern Rock, it emerged yesterday.

Councillor Ian Miller, leader of the council, stressed yesterday that they hadn’t made any investments with the bank during their recent crisis.

The cash was invested on September 22 and that is due to expire on October 31.

At a meeting of the council’s strategic policy and resources committee on September 17, it was agreed to re-instate Northern Rock to the council’s approved investment list.

As a result of the recent downgrade of the credit rating of Bradford & Bingley, they had been removed from the current list.

In a report to councillors, John Symon, head of finance, explained: “Following the nationalisation of Northern Rock and the announcement of the extension of the terms of the government guarantee for lenders which now applies to local authorities, it is now felt appropriate to re-instate the bank onto the list of approved counterparties.

“This reflects the fact that any investments made now and into the future would be fully covered by the Government’s guarantee.”

He added: “It is also felt that Northern Rock’s liquidity problems, which arose last year, are unlikely to recur, given their current banking activities and operations and therefore the risk of the Government’s guarantee being called upon is deemed small.”

The terms of that guarantee, issued by HM Treasury, stated that not less than three months’ notice would be given of any termination of the arrangements.

Mr Symon added: “It is appropriate and prudent to limit any deposits with Northern Rock to a period not exceeding three months.”

Councillors agreed that they should set a maximum lending limit of £20 million and a maximum lending period of three months.