A COUNCIL caught up in the Icelandic banks collapse has asked for bids from new financial advisers.

Cheshire county council, which invested £8.5m with the failed Heritable Bank, is considering employing another company to manage its £300m of investments and £270m of debts after the current contract came to an end.

The authority says that the contract was put out to tender before the crisis and said the timing was nothing more than an 'amazing coincidence'.

The current contract ended in September and the new one will last only until the council is dissolved on March 31 next year.

Tenders have also been put out for two new authorities that will be formed when the county council is abolished next year.

One of the firms in the running for the contracts warned 45 local councils not to invest in Icelandic banks as early as two years ago.

London-based treasury management company Arlingclose was invited to apply for the tender in August. The unitary council contracts are thought to be worth about £10,000 each a year for a contract that will end in 2012.

Evaluating

A council spokesman said: "We are currently in the process of evaluating tenders. Representatives of the current and future councils have been involved in the review procedures.

"This is not in relation to the Icelandic banks - the review is being carried out because of future segregation and the end of a contract. It is just an amazing coincidence."

In a statement two weeks ago, council members expressed 'full confidence' in finance officers who invested nearly 5 per cent of the authority's £200m deposits with Heritable, a British subsidiary of Landsbanki. The money is now at risk, but the council acted prudently, it said.

The successful tender or tenders are expected to be announced next week.

Arlingclose director Mark Pickering said: "If successful, we would look forward to working with the authorities and to securing them with improved returns in the future. Our credibility has been earned through the Icelandic situation."

The council's current financial advisers are also bidding for the new contract.

Cheshire is one of more than 100 authorities, including Bolton and Lancashire, that together have invested almost £800m in Iceland's stricken financial institutions.

The three authorities have launched reviews of their major investments.

Cheshire has allowed money to be placed with institutions supported by the British and Irish governments, including banks and building societies like HBOS, RBS and Lloyds TSB.

Lancashire county council has changed its financial advice policy after investing £10m with Landsbanki, including £1m from Lancashire Police Authority.

Earlier this week, Bolton council confirmed it has ordered a review of all `sizeable' investments - thought to be worth up to £80m. The council has £2m deposited in Landsbanki and £4m with Heritable.