Wyre Forest District Council has £9 million invested with Icelandic Banks, which it admits is “at risk”.

The council says it is using its “best endeavours” to retrieve the money, which is believed to be in accounts placed in danger by the crisis in the Icelandic economy.

The money represents around a third of the council’s total investments. If it is lost it would throw Wyre Forest into a financial crisis.

Wyre Forest Council spokeswoman Rebecca Dunne said: “The Council, through the Local Government Association is seeking urgent reassurance from the Chancellor that he will protect local authority deposits held in troubled Icelandic Banks.” 

The admission from the council comes after it emerged Landsbanki and its internet bank Icesave had been placed in receivership and nationalised. 

Iceserve has prevented people taking money out, including large investments from councils.

Doubt has also been placed on the reliability of Icelandic’s two other main banks Kaupthing and Glitnir, which have also been taken under Government control.

Ms Dunne said the council was now working hard to protect any impact which could result from the global crisis. It has investments in all three banks.

She said: “The council is working to take all necessary steps in consultation with fund advisers and the Local Government Association to ensure that the Council’s money, invested in accordance with the Government guidance, will be fully protected.”