HERTFORDSHIRE County Council has received 92 per cent of the funds it had invested in Icelandic banks.

Investors had been attracted to the high interest rates offered by a small number of Icelandic banks.

But in 2008 the banks collapsed – raising fears that the investments may be lost.

At that point the county council had £28m invested in four Icelandic banks – Glitnir, Landsbanki, Heritable Bank and KDF.

But a financial report – presented to the latest meeting of the council's audit committee – reveals that £26.79m has now been paid back.

The 2008 global financial crisis hit Iceland hard.

The worldwide slump prompted their currency to crash, leading to soaring unemployment, with their stock market practically wiped out.

However, unlike other Western economies, the Icelandic government let its three major banks - Kaupthing, Glitnir and Landsbankinn - fail and went after greedy and reckless bankers.

Many senior executives have been jailed and the country's former PM Geir Haarde was also put on trial, becoming the first world leader to face criminal prosecution arising from the crash.

£1.2m still missing

Herts County Council made claims against three Icelandic banks that are now closed – with the council having received £6.95m of their £7m investment from Heritable Bank; £9.23m of £10m from Landsbanki; and £7.05m from £7m from Glitnir (which reflects interest rates).

The council has also received back £3.56m from a £4m investment in KSF. This claim remains open – but the amount returned is expected to rise by around £100,000.

Commenting on the issue following the meeting, the county council's assistant director of finance Steven Pilsworth said: "Since 2008, the council has worked alongside the Local Government Association (LGA) and over 120 other councils across the country to recover amounts invested with Icelandic banks.

"To date, the council has recovered £26.8m of the £28m it had originally invested, a recovery of nearly 96 per cent. Work will continue to see if any further sums can be recovered."