OFFICIALS at Stroud District Council are ‘optimistic’ that they will recover the £3million of taxpayers’ money invested in an Icelandic bank, it was revealed this week.

Gloucestershire County Council, which has already recouped £342,000, also expects to get back most of the £12million it deposited in three banks.

Both local authorities are in the middle of a legal challenge led by the Local Government Association (LGA) to recover the cash following last October’s crisis.

An SDC spokesman said: "While we remain hopeful, there are still issues to be sorted out and hoops to jump through before we can be certain whether, when and how much money we get back.

"Stroud, along with all other local authorities affected, has been working with the LGA, providing information, submitting claims and contributing to the legal costs incurred to assist with the recovery of the deposits."

SDC invested in Glitnir Bank early last year when it was A-rated for credit worthiness but was forced to make a claim with receivers after it went into liquidation last October.

Based on advice from the Chartered Institute of Public Finance and Accountancy, the authority expects to recoup the full amount and maybe some of the interest from the bank’s assets before March.

An SDC spokesman added that officers were ‘optimistic’ of success and ‘assumed’ they would get the £3million back in financial plans including the draft budget.

GCC invested some of its reserves in three banks more than two years ago: £8.9million in Glitnir, £2m in Heritable and £1.6m in Landsbanki.

The money, which is used for emergencies, such as flooding, and to maintain cash flow, was also deposited when the banks had top credit ratings.

GCC, which has already received £342,000 back from Heritable, expects to recoup most of the investments and interest by the end of March.

A GCC spokesman said: "The advice we have been given by the LGA, which is working on our behalf, is that we should get the majority of our money back by the end of March 2010.

"However, this is dependent on the timing and success of the legal process which can be unpredictable."

Councils with investments in Glitnir expect to be told in November whether they are preferential creditors, meaning they would be the first to be reimbursed.

* Is SDC right to assume the Iceland money will be recouped for the draft budget? Comment here...