Thursday, 9 October 2008

The only AAA rated blog west of the Tennant Canal

according to the Nokov & Pornit (est. 1955) ratings agency.

All right, it's a sick joke in view of the news today that at least six Welsh local authorities had some of their balances invested in Icelandic banks which have now gone down. I'm keeping my fingers crossed that Neath Port Talbot, which has yet to report, is not another.

In view of the bad press which Icelandic entrepreneurs have received in the last few years, I would not have risked my own money, never mind other people's, in Iceland. "Your Money" was issuing warnings to retail investors back in February.

However, a spokesman for the Welsh Local Government Agency made the very reasonable point that all the banks in question had, at the time of the investment, "A" ratings from the standard credit ratings agencies. He also pointed out that fixed-term contracts would have been entered into, which would have been difficult to break.

One has to wonder whether the big three credit rating agencies respond quickly enough to danger signals even after an adverse report of their performance in the wake of the Enron affair.

Update: see Peter Black's blog.


Anonymous said...

What are our local authorities doing putting money in an "off shore" account.

Why wasn't this money looked after better by the local authorities concerned?

Will anyone be held to account?

With the warnings given, why wasn't this money withdrawn from this bank by these local authorities?

Questions, questions, lets have some answers

Frank H Little said...

To be fair, local authorities have been compelled to spread their investments since Western Isles council burnt their fingers with BCCI. However, I understand that one English authority thought that spreading over three Icelandic banks contributed to diversity. :-(

why wasn't this money withdrawn from this bank by these local authorities?
In some cases, because it was in the form of fixed two (or more) year bonds.

Frank H Little said...

Neath Port Talbot turns out to have been the most indebted of all, according to this afternoon's news. £8m of our balances was deposited direct with Iceland banks, and £12m with a British subsidiary.