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Kent County Council (KCC) is one of dozens of local authorities facing the prospect of losing hundreds of millions of pounds after it was revealed that many had sizeable deposits with the failed Icelandic banks Landsbanki and Kaupthing.

KCC has £50m deposited in Landsbanki and its UK subsidiary Heritable, as well as Glitnir Bank.

Alongside Kent, Westminster City Council confirmed it had £17m tied up in Icelandic accounts, while other exposed councils include Havering in east London (£12.5m), Sutton in south London (£5.5m) and Ipswich Borough Council. The total for authorities in the capital has been estimated at £200m by the umbrella group London Councils.

Alistair Darling, the Chancellor, announced yesterday that the Government would be guaranteeing all private savings in the Icelandic banks Kaupthing Edge, Icesave and Heritable Bank. But he stopped short of providing guarantees for local authorities and businesses which have money with the banks.

The Local Government Association assured the public that no council would run into immediate difficulties as a result of the Icelandic banks' collapse. However, it called on the Government urgently to guarantee all council money, claiming that, in the longer run, these funds would be vital to keeping frontline services running.