The Cats Protection charity is one of the latest victims of the Icelandic banking crisis with £11.2 million of deposits in Kaupthing Singer and Friedlander which are now at risk of being lost due to the collapse of the bank.

Peter Hepburn, the Cats Protection's Chief Executive realeased the following statement :

“Cats Protection (CP) has announced that it has become a victim, alongside many other organisations, institutions, companies and private individuals, of the collapse of the bank Kaupthing Singer and Friedlander.

“Cats Protection, like all charities, has to place funds with banks and it uses the banking system to maximise its income in many ways. One of these is to deposit the charity’s cash reserves and gain by the interest earned. In August 2005, the charity identified that Kaupthing Singer and Friedlander, a UK bank, was a bank where it could invest with confidence as it had a high credit rating. Kaupthing Singer and Friedlander is owned by an Icelandic bank, Kaupthing. Consequently, some of Cats Protection’s cash reserves were placed with them on a 90 day arrangement. Our deposits amounted to £11.2 million.

“The credit ratings of the various banks the charity uses are checked periodically and quite recently, Kaupthing Singer and Friedlander’s rating remained sound.

“In the light of the demise of some major banking institutions, Cats Protection decided that it should diversify even further and on 17 September 2008, the charity gave 90 days notice to KSF of its intention to withdraw these deposits.

“On Wednesday afternoon, 8 October, Cats Protection received news that the bank had been put into administration. Some of the deposits held within the Kaupthing bank group have been rescued under a deal set up by the UK treasury. However, at present the future of other deposits, CP’s included, is uncertain. Many local authorities and councils find themselves in similar positions and we and they are exerting pressure on the Treasury to act.

“Cats Protection believes there is a case to be made to the Treasury that its particular deposits are public money that has been donated for us to help cats and provide benefits to the public. The charity feels strongly that public deposits should be safeguarded and is currently calling on, and working with, other organisations within the voluntary sector to support each other in this call to action on the government. CP is heartened to know that its regulator, the Charity Commission, is in talks with the Financial Services Authority.

“In addition the NCVO, ACEVO and CAF have all been making the same case as CP has.

“Cats Protection would like to assert that, whilst upsetting, this news will have no impact at all on the charity’s day to day operation. CP is still well placed to live within its means – this news makes no threat to the charity’s ability to pay bills, salaries, support its network of branches or most importantly, provide for the cats in its care.

“The deposits held by KSF were earmarked for long term projects only and to provide a safety net in case of real emergencies. Therefore, the only areas of Cats Protection’s work that may be affected will be those plans around future new facilities. These are very early days though and Cats Protection shall look at these plans alongside many other influencing factors in the coming weeks.”

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Having all monies deposited in one pot doesn't sound like a risk-averse strategy (although it may be much more complicated than that). I hope that charities don't lose out through the icelandic bank 'crisis' however, I do think that when such organisations want to claim 'public monies' as a defence they need to think very carefully about the risk they take whilst trying to gain higher interest rates. Minimising risk of losses must be a priority over higher interest rates. Also for CP to have £11.2 million separated out just for long-term projects you would hope that their balance sheet looks well balanced and healthy.

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