FEARS are growing that Flintshire Council could lose more than a million pounds invested in a collapsed Icelandic bank.

It was originally thought the council would be able to recover 83 per cent of the £3.7million it held in Landsbanki, which equated to a loss of £600,000, but speculation is mounting that the final recovery figure may be closer to 40 per cent.

Local authorities were originally given priority status by the Landsbanki winding-up board, but other investors have raised objections to this.

Kerry Feather, the council’s head of finance, told members at an audit committee meeting yesterday: “Our expected recovery rate is 83 per cent, but if preferential status is lost then our recovery rate goes down to the late 30s or 40s so it’s extremely important to us that local authorities keep preferential treatment.”

The non-priority creditors have now launched a legal battle and their case will be put before the Icelandic District Court in the coming months.

But the Local Government Association (LGA) says it is confident its lawyers will successfully fight to maintain priority status.

In a letter to Flintshire Council the LGA said: “We remain confident there is a strong legal argument supporting the cause for local authorities to be recognised as depositors that are entitled to priority status.”

Council bosses have been approached by several companies offering to buy the council’s claims against the Icelandic Bank for abaout 42 per cent of their value, but the council has so far rejected all offers.

Phil Latham, from the council’s finance department, said: “They are willing to buy the debt off us, but they are only willing to pay about 42 per cent.

"There has been nothing that we would consider that we should accept.”

Chief executive Colin Everett added: “We see the offers as being rather derisory in the circumstances and high risk.”

The council must now wait for the outcome of the court battle.