HUNDREDS of millions of pounds of Essex taxpayers’ money will be invested in banks previously considered too risky.

Essex County Council has agreed to invest its reserves in some of the nation’s financial institutions which are currently on a “negative watch” list.

Negative watch means a company’s credit rating is under review and was therefore suspended from the list of acceptable places to invest, under the council’s treasury management strategy.

However, this strategy has now been changed and the head of finance can now invest in companies on this danger list, ratified by the full council earlier this week.

Institutions, including Lloyds TSB, Nationwide, Royal Bank of Scotland and Santander UK, are now considered riskier because they are now deemed less likely to receive more Government support, which had buoyed their credit ratings.

But with so many on the watch list, the council was running out of banks to invest in.

A spokesman for Essex County Council said: “The council’s overriding concern is to manage cash in a way that ensures the principal sum is safeguarded and cash is only invested until it is next required.

“Only once the council is satisfied it has achieved these aims does it consider investment returns.

“The council considers banks very carefully before deciding to place funds with them.

“If the council is in any doubt, it will not place funds with them.”