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15.7 million lost in Iceland

Council’s deposits with an Icelandic bank were made even though their credit rating  had been made subject to a “negative rating outlook”

Opportunity to withdraw funds following subsequent rating downgrade was not taken.

Cllr Bianco’s claim that their external Auditors, Deloittes, had exonerated them is untrue.

Standards Assessment Sub Committee says no investigation required as there is no evidence that false statement was “deliberate”.

Following an appeal case will be reheard.   Committee urged to recommend investigtion.
See e-mail


In February the Council put in place a revised Treasury Management Strategy.  For for short term investments the relevant bank had to have a minimum rating of F1 as assessed by Fitch, a credit rating company.    If it falls below F1 no “new” deposits can be placed with it.  The Council are alerted to changes in credit ratings by an outside treasury management advisor. 

Under delegated authority the Director of Finance & Resources makes all all treasury management decisions.

On 1st April Fitch put all Icelandic banks on a “negative rating watch”.

On 9th May, although they confirmed Landsbankski as still being  F1 grade, they gave all Icelandic Banks, including Landsbanki, a “negative rating outlook” indicating that their credit rating could be down graded in the future.

In spite of this between 4th August and 29th September L B Hillingdon made a number of short term investments totalling 20 million in Landsbanki and its UK subsidiary, Heritable Bank, maturing between 14th October and 14th November.

On 30th September Fitch downgraded Landsbanki to below F1 grade.

Although not obliged to under their Treasury Management Strategy,  the Council could still have withdrawn our money at this stage albeit suffering an early withdrawal penalty.

Around 8th October 2008 Landsbanki failed.


A report to the Council’s Audit Committee of 18th February stated that:

..the council based its decisions on the credit ratings provided by the ratings agencies and at the time of investment, they all met the criteria as detailed in the Treasury Management Strategy”.

“... an internal investigation was conducted ... which confirmed that all procedures and decisions ware taken in line with agreed policy”.

In March  the Audit Commission produced a report “Risk & Return -  English local authorities and the Icelandic banks”. It said:

As a group, local authorities heeded the warning signs and anticipated the downward shift in credit ratings” and  “ The number of new deposits also fell and, in particular, declined sharply after April 2008, by which time Moody’s had downgraded credit ratings for Landsbanki..”

2010   Biancogate

At the February 2nd Council Question Time held at Ruislip High School Cllr Bianco, Cabinet Member for Finance and Business Services, stated in answer to a question submitted in advance about the Icelandic investments:

“..... our internal audit team undertook a full investigation of the council’s treasury management policies and they reported to our audit committee that all policies and procedures had been followed and there were no breaches of the treasury management strategy, and further Deloittes were appointed and undertook an independent review of Hillingdon’s practices and found the same.  Whilst it is disappointing that we are in the position we are we did not break any rules getting there”.

To hear a tape recording click here

Deloittes are the Council’s own internal auditors. We requested a copy of their review under the Freedom Of Information Act. It turned out there was no report by Deloittes and no independent review of Hillingdon’s practices.

On 10th March the Gazette  reported  that only 4.23 million, presumably some or all the money deposited with Landsbanki’s UK subsidiary,  had been recovered and efforts to recover the rest has hit a brick wall.

On 9th April we wrote to Cllr Bianco asking for an explanation of his claims that the Council had been exonerated by Deloittes. No reply or acknowledgement has been received. 

On 30th April we wrote to Deloittes pointing out what had occurred with a copy to Nick Hurd.

Not having heard anything from Cllr Bianco we have have made a formal complaint via the Monitoring Officer to be heard by the Council’s Standards Committee.  We are claiming that Cllr Bianco has breached the Councillors Code Of Conduct.

The Council’s Monitoring Officer will now submit a report for  the Standards Assessment Committee.  We have asked for a copy of this report but this has been refused, we believe unlawfully, by the Council.  Click here to see the relevant correspondence.

We received a letter from the Borough Solicitor dated 30th July together with a Written Summary of the findings of the Standards Assessment Sub Committee.  There was no indication from this that the 5 breaches of the code conduct about which we had complained had been considered.  The report said that the committee had decided that no action should be taken by a majority (with Cllr MacDonald dissenting)  as there was no information to suggest that Cllr Bianco had made a deliberate false statement.  However, how could the statement  have been other than deliberate.  It was a prepared answer to a written question submitted in advance.

An appeal is being lodged.  An e-mail has been sent to the Monitoring Officer to be placed before a review committee who will be considering if the complaint was correctly dismissed or if it should be subject to an investigation

Links to supporting information