Solihull Borough Council has admitted it has £3 million frozen in Icelandic banks following the collapse of the country’s economy.
The money, in three separate accounts, has effectively been lost to the council.
Borough cabinet member for resources, Ken Hawkins, is demanding assurances from Chancellor Alistair Darling that the money will be protected.
But Mr Darling has so far refused to give assurances to a number of UK councils holding investments in Icelandic financial institutions.
Coun Hawkins (Con) said: “I can confirm that we have three separate investments of £1 million each with Icelandic banks.
“Solihull Council deposits money in a wide range of banks, taking independent investment advice and within strict guidelines to spread any risk.
“All councils with investments in Icelandic banks are seeking assurances from the Chancellor about how these will be protected.”
Coun Hawkins rejected suggestions that the council would have to cut services in order to recoup the money. He said: “I can reassure residents that front line services in our borough will not be affected.”
The council’s investment is split between Landsbanki, Glitnir and Kaupthing banks.
Solihull is believed to be the only West Midlands council with Icelandic investments.
Spokespersons for Birmingham, Sandwell, Wolverhampton and Dudley councils confirmed the local authorities had no money in Iceland.
The West Midlands councils pension fund, run by Wolverhampton Council, has also avoided investing in Iceland.
Birmingham City Council does, however, have a total of £77million invested in six foreign banks. The bulk is deposited in the Allied Irish Bank, the Anglo Irish Bank and the Bank of Ireland.
The Irish Government has recently guaranteed all individual savings accounts, but it is not known whether the pledge extends to foreign investors.
The rest of Birmingham’s overseas holdings are with the National Australia Bank, the Riyad Bank and German financial conglomerate DEPFA.
Jon Warlow, director of corporate finance at Birmingham City Council, said: “The council each year approves an investment policy which restricts lending to financial institutions with high investment grade credit ratings.”
Warwickshire County Council, which has not invested in Iceland, is warning that local authorities are facing a struggle to identify safe havens.
Oliver Winters, the council’s head of finance, said: “We continue to monitor the events in the investment world and are taking a very cautious approach to our investments. Our overriding objective is to protect the principal sums invested even if this means we may not be achieving the maximum return offered by some investment institutions.”
The Local Government Association is urging Mr Darling to extend protection given to British savers to local authorities.
The Chancellor pledged to make good all losses suffered by 300,000 British savers caught in the collapse of Icesave, the on-line bank that went into reveivership last week. The move will cost the Treasury £4.5 billion.
The Government also seized control of the British arm of Iceland’s Kaupthing bank.
The biggest local government casualties of the Icelandic collapse are believed to be Kent County Council, which stands to lose £50 million, and Westminster City Council, with £17 million on deposit.
Here is a run down of how some of the authorities are affected and what they are saying.
* Kent - £50 million (£15 million with Glitnir Bank, £17 million with Landsbanki and just over £18 million in its UK subsidiary, Heritable).
Nick Chard, KCC's cabinet member for finance, said: "We have got a robust financial system and this will not affect council services."
* London: at least eight councils are affected - Westminster (£17 million), Havering (£12.5 million), Sutton (£5.5 million), Barnet (£27.4 million), Brent (£15 million), Hillingdon (£20 million), Bromley (£5 million) and Haringey (not yet disclosed).
* Westminster Council said it has £300 million-worth of investment at home and abroad with reserves of £70 million.
A spokesman said: "Westminster Council has been awarded the highest accolades from the Audit Commission over recent years with regard to the standards of its frontline services, financial management and the value for money we offer our residents."
* Transport for London has a £40 million deposit with Kaupthing Singer & Friedlander, which has been placed into administration.
* Ceredigion County Council said it had £5.5 million with Icelandic banks.
* Cheltenham Borough Council has £11 million invested in the banks, Gloucester City Council has £2 million and Tewkesbury Borough Council has £1 million.
Steve Jordan, leader of Cheltenham council, said: "These are exceptional times, the like of which we have never seen in world financial markets.
"Cheltenham Borough Council has an extensive investment portfolio and only a portion - £11 million - is invested in Icelandic banks."
* Cornwall County Council said it had £5 million invested with the Icelandic bank Landsbanki from total investments of £360 million. The council's revenue budget for 2007/2008 was £309.4 million and it received £185 million from Council Tax.
Brian Higman, the council's executive member for corporate support, said: "This situation illustrates the prudence of the council's policy of spreading potential risk among a large number of investment opportunities to try and protect against a collapse like this."
* Dorset County Council has deposits in the form of temporary loans to Landsbanki and Heritable totalling £28.1 million.
* Lewes District Council in East Sussex said it had £1 million deposited in Landsbanki.
* North Lincolnshire Council said that it had £2 million invested with Landsbanki and and a further £3.5 million with its subsidiary, Heritable.
A spokeswoman said: "At this point in time we don't know whether the money is totally lost, partly lost or secure and are awaiting confirmation. But it does not affect the council's ability to pay staff and creditors."
* North East Lincolnshire Council has £2.5 million on deposit with Landsbanki out of a total of £90 million of investments.
Alan Madin, executive director of corporate services, said: "A delay in repayment is manageable without impact on council services and the council carries a level of self insurances that would help cushion a loss should any occur."
* Monmouthshire County Council had £1.2 million with Heritable.
* Perth and Kinross Council said it has £1 million invested with Glitnir bank.
* Powys County Council said it had £4 million, about 6% of its cash investments, with two Icelandic banks - Landsbanki and Glitnir.
A spokesman said: "It is too early to say whether our cash is at risk or not."
* Rhondda Cynon Taf County Borough Council said it had £3 million deposited with Heritable and would "investigate all avenues in recovering this money".
* Wakefield Council's chief executive Joanne Roney confirmed the authority had £9 million in Icelandic banks.
* West Sussex County Council announced that it has £12.9 million deposited in Heritable, which a spokesman said represents some 5% of the authority's balances in the banking system.
A spokesman said: "While the turmoil in the financial markets is of considerable concern, with a revenue budget of more than £1 billion, this sum of money does not impact upon the day to day business of the county council."
* Brighton and Hove City Council said it suspended transactions with one Icelandic bank - Kaupthing Singer & Friedlander - about a year ago amid concerns about the country's banks expanding too rapidly.
Finance councillor Jan Young said today: "We suspended transactions with the one we had on our books about a year ago after picking up concerns in the marketplace about Icelandic banks expanding too quickly.
"Our watchword is caution."