Much is being made of the UK exposure levels in Icelandic banks, from individual investors to a number of firms and even councils.  Today it has emerged that financial experts have been sent in to 3 as yet unnamed UK councils to look into the shortfall of funds….not a good situation.

The Icelandic government seem to be working “night and day” though to solve the problem.  Not only have they cut their interest rates by 3.5% to a new level of 12%, but they are hoping to wrap a loan from Russia to cover the losses.  It is thought much is recoverable over the next 2-3 months.

So how is this affecting everyone?  Certainly it will reduce the spending habits of anyone exposed to the banks.  The bigger worry though seems to be that, in the event that they cannot recover their funds, significant tax rises and further service cuts will result from the councils that have been affected.

We have come to a point where nationalised banks, both abroad and at home, need to give the public full transparency into their credit exposure.  We need to know if the money being pumped into the banks is covering loss of profit margins or to actually provide funds that do not exist anymore, or may not exist in the future.  Only then can we understand the full extent of the current situation.  Here’s hoping it is not the worst case scenario.