KIRKLEES Council is no longer investing money in foreign banks.

The decision was made in the fall-out created when £1m was put at risk when an Icelandic bank collapsed.

Kirklees Council had £1m invested with Landsbanki when it collapsed in October 2008.

Members of the council’s Corporate Governance and Audit Committee heard that around half of the principal and interest remains outstanding.

But councillors were told that it expects to recoup all of the monies due – even though final payments might not be received until 2018.

There might also be a small loss as a result of exchange rate fluctuations.

Clr David Sheard, the council’s deputy leader, said: “I’m pleased about this. Iceland are about the only ones who refused to back their banks and sent the bankers to prison. It’s interesting that we’re getting it back.”

Nationally more than £1bn of taxpayers’ money held by 100 councils was put at risk when Landsbanki and another Icelandic bank, Giltnir, went bust.

As a result, Tim Mitchell, Kirklees Council’s Accountancy Services Manager, said they would not be investing directly in foreign banks, other than via Money Market Funds.

Clr Sheard had asked if it was possible Kirklees investments could be made in businesses which worked in the local economy.

He said: “Would it not be prudent to loan money to organisations that build houses in Kirklees and put our investment money back into the local economy through investments?”

David Smith, Director of Resources, said it could be considered if members requested it, but added: “We need to look at long-term loans as well as short-term loans.

“One of the challenges for Northern Rock was that they tended to use long-term monies for short-term objectives.”

Last year Kirklees invested £47m and gained £181,000 in interest. In 2008 Kirklees had investments averaging £170 million.

Investments have been scaled back due to confidence in the sector and investments made only with banks, buildings societies and funds which are perceived to be very secure.

The authority is expected to borrow up to £50m during the next financial year on a short-term basis, with the council able to borrow at discounted interest rates.

Kirklees’ long-term loans at the end December totalled £452.4 million and short-term loans £15.4million.

Fees for Kirklees Council’s new auditors, KPMG, have reduced by 40%, from £350,280 in 2011/12 to £210,168 for 2012/13.