The post you are reporting:
I know debate has raged in the political section on this matter but I have decided to post this here because this is not in any way political and I am approaching it entirely from a financial point of view.
In the Dover Express today a great deal more information has been revealed about DDC's investment in this bank and I am commenting here as a finance professional.
1/ The £1m was invested with Landsbanki in a 1 year fixed term/rate investment 11 months ago when they were rated AA.
This is a high rating, higher than many British institutions. Anyone should be able to invest in a bank with such a rating in confidence.
2/ This money represented 4% of the portfolio.
This is not an unreasonable proportion to place in a single institution particularly one with an AA rating and for a one year deposit.
3/ The make up of the rest of the portfolio is not revealed other than the fact that Investec are manging a large proportion.
I know Investec from a retail perspective and have 8 of their retail funds approved for investment, though I have not used them much. They are a reputable and professional fund management company and quite suitable for this purpose. This was the only company who identified a problem some years ago with 'split caps' and as a result made changes to their Capital Accumulator Fund in good time to avoid the split cap crisis. They do know what they are doing. Also Paul revealed that DDC removed £8m from their control due to being disappointed over investment returns. That is a good sign because it shows DDC are not too passive and actively monitor their investments against benchmarks.
I believe therefore there is enough information to make a professional judgement. In particular the fact that the £1m was only a one year commitment into an AA rated bank (at time of investment) demonstrates that they were certainly not taking any excessive risk or in any way being irresponsible this public money.
We have had a most extraordinary set of circumstances that has led to this happening. Let me demonstrate just how difficult this has been. In the 'pinks' this week a case was highlighted in which a reputable, experienced financial adviser conducted what we call 'due diligance' on the other Icelandic Bank, Kaupthinge Singer & Friedlander in September THIS year. His checks were good enough for him to commit a six figure sum, of his retail client's money to this bank.
So where should the responsibility be laid?
I have said before that the rating agencies certainly need to review their methodology and the regulators, the Treasury, Bank of England and FSA also have a responsibility.
Investments need to be made with confidence in the regulatory system and the information from key agencies. Without that we are all in the dark.
So what about the other Councils, such as Brighton & Hove who have been milking this for good publicity? I do wonder whether they are being totally up front. It may be that their 'dis-investment' was at the maturity of one of these one year fixed rates in the last few months, or in some cases perhaps it referred to a smaller Icelandic Bank about which there were early rumours. It is possible that someone made a judgement, a good call, against the regulators information and rating agency details but somehow I doubt it. That person could earn a fortune in the money markets if that good. A lucky call, maybe. Spinning whatever happened to look good for their local electorate, certainly.
I believe that those who were so quick, on little information, to throw around wild accusations at DDC should be man enough to back down and even to apologise. I hope they will. There is absolutely no evidence at all to back up their accusations and recriminations, however 'human' it may be to feel that way.