COLCHESTER Council lost £347,000 of taxpayers’ money following the collapse of an Icelandic bank.

After recovering some of the £4million invested in Landsbanki the council sold its remaining investment.

In total £3,653,000 was recovered.

A spokesman said: “The council sold its Icelandic investments through a competitive auction process, recovering funds that were greater than what we had anticipated we would get back.

“There will be no further cost to the council as a result.”

The £4million was deposited with the bank in September 2008 weeks before the bank collapsed.

Leader Paul Smith, who was in charge of the finances at the time, said: “When we invested it had a triple A rating, but the situation deteriorated extremely rapidly.”

About 100 councils, including Colchester and Braintree were affected.

Mr Smith said: “I was pleased all the councils worked together to get the best results.

“The offer made to us wasworth more than we had it on our balance sheets for.

“Rather than wait two to five years we are nowusing the money to invest in things in Colchester and it is one of the reasons we are not having to borrow more money.”

Mr Smith defended the decision to make the initial investment stating it was in line with policy.

He added: “Only one councillor ever called for a review of the borrowing strategy and that was myself when in opposition.

“When it took place we thought we had made the system more robust.

“It is ironic I was the councillor in charge of the finances hit.”

The council was praised by the Audit Commission for the speed of its reaction following the collapse.

In total the council lost just under nine per cent of its investment.

Braintree Council invested £5million in total across three banks and has recovered a similar percentage.