ALL of Scottish Borders Council cash investments in banks and other financial institutions – worth in excess of £20million – are being monitored daily to ensure they are secure.

That assurance has been given to councillors after it was announced that short-term deposits of up to £5million are to be made in a Swedish Bank.

Elected members heard that the decision to open a “call account” with Svenska Handelsbanken, recently accorded an AAA credit rating, is in line with SBC’s updated treasury management strategy.

According to chief financial officer David Robertson, that policy reflects a “prudent approach to risk and the council’s concerns about security of investments”.

Such concerns are the inevitable fall-out from the disastrous decision by “senior finance officers” at SBC to begin investing in two Icelandic banks, offering interest rates of up to 6.5%, which collapsed in 2008.

When the crash came, the council had £5million in Landsbanki and £5million in another bank called Heritable.

The council eventually recovered £4.7million of the latter investment.

And earlier this year, in an auction organised by the Local Government Association and run by Deutsche Bank, the council sold off its £2.4million claim on the unpaid balance of its Landsbanki holding for just over £2million – thus finally netting £4.68million of its investment with that bank.

Interest on the two deposits, estimated at around £600,000, was never recouped and the hole in the council’s accounts required the transfer of cash from its reserves and permission from the Scottish Government to borrow over £1million.

“I am, of course, aware of previous issues relating to the Icelandic banks,” said Mr Robertson as he presented his mid-year treasury management update to councillors last week.

Mr Roberston, appointed in 2011, described Handeslbanken as “one of the best and safest banks in Europe” and said Sweden had a AAA sovereign debt rating from all three credit rating agencies – higher than the UK.

“By opening a call account with Handeslbanken, the council has instant access to the money deposited,” he said. “The bank is registered in the UK and, based on an objective assessment, it is one of the safer bets.” Mr Robertson said he checked the credit ratings of all banks used by the council on a weekly basis.

He explained that, at September 30, the council had £17.6million in interest-bearing accounts with an investment yield for the first six months of this financial year of 0.37%.

“It is the council’s priority to ensure security of capital and obtain an appropriate level of return which is consistent with our appetite for risk,” reported Mr Robertson.

“It is a very difficult investment market in terms of earning the level of interest rates commonly seen in previous decades.

“The potential for a prolonging of the Eurozone sovereign debt crisis and its impact on banks prompts a low risk and short-term strategy and investment returns are likely to remain low.” Mr Robertson said the use of Handelsbanken for up to £5million – in addition to the £17.6million already invested – reflected the need to “explore opportunities to invest surplus balances in the short term”.

Councillor Michelle Ballantyne, chair of SBC’s audit committee, said: “Our treasury management team does an excellent job and the first thing they do every morning is check that our money is safe.

“The banking system is not as secure as we once believed it to be, but I know our staff are extremely prudent and use sound judgement to make the best decisions.”