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Neath Port Talbot and Caerphilly councils were between them owed 35m

Welsh councils and police forces with more than 66m invested in Iceland’s failed banks may struggle to get less than half of it back after a three-year fight with the country’s authorities.

Councils and police forces with funds invested in one of the banks – Landsbanki – are to get up to 98% of their cash back.

But according to the Local Government Association (LGA), of just over 1bn invested with the four collapsed Icelandic banks by local authorities across Britain, Landsbanki represented 413m, only 41%.

As yet it is unclear how much, if any, of the remaining 59% of public money will be returned.

Neath Port Talbot and Caerphilly councils were between them owed 35m following the collapse of the banks. The remaining 30m or so was owed to six other Welsh councils and three police authorities.

The 98% deal with Landsbanki was secured following court action by the LGA in Iceland.

A spokesman for the LGA said: “There was a group action undertaken by all the local authorities – 145 across England, Wales and Scotland.

“They’ve all received priority status and the expectation is there’ll be the recovery of an estimated 98% of the value of the deposits (in Landsbanki).”

The Icelandic government, which took over Landsbanki, expects the 98% owed to be settled by 2013.

Neath Port Talbot is owed 20m, with Caerphilly due 15m, Ceredigion 5.5m, Powys 4m, Gwynedd 4m, Flintshire 3.7m, Rhondda Cynon Taf 3m and Monmouthshire 1.2m.

South Wales police authority is owed 7m, Dyfed-Powys 2m and Gwent 1m.

The UK Government froze all the British assets of Landsbanki, after its failure during the recession.

The LGA spokesman added: “We expect the amount of the Landsbanki initial distribution to be about one third of the value of the claim, and all priority creditors will get the same proportion across the board.

“They haven’t yet published a schedule of future dividends, but it’s likely that the 2013 timeframe is what they’re working to, considering the government has made the commitment.”

Chief executive of the Welsh Local Government Association Steve Thomas said he was delighted with the near “full recovery” of the money owed by Landsbanki.

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