councils in Oxfordshire have reacted with cautious optimism to news they may recoup some of the money they have tied up in collapsed Icelandic banks.

The administrators for Heritable Bank, the British arm of Iceland’s Landsbanki, said this week its creditors could eventually get up to 80 per cent of their money back.

Heritable was placed in administration after Landsbanki was nationalised by the Icelandic government last October.

Oxford City Council has a £3m deposit with the bank, and a further £1.5m frozen in fellow Icelandic bank Glitnir, which is in receivership.

Details of repayments from other Icelandic banks are yet to emerge, but it is hoped this latest announcement may set a trend.

An Oxford City Council spokesman said: “The council has received some potentially encouraging news about the £3m invested with Heritable Bank, although this has yet to be confirmed.

“The council may receive 15 per cent back of its investment with Heritable Bank later this year.

“It is predicted that we may receive a return of up to 80 per cent by the end of 2012. If this return is achieved, the Council’s loss will total £600,000 from the investment.

“We do not currently have any news about any returns on the Glitnir investment.

“We particularly welcome the Heritable Bank news, as there’s still general turmoil in the market.

“We expect to lose a further £400,000 this year from the drop in interest rates, and the changes to concessionary bus fares have led to a £600,000 spend from our budget.”

Barry Norton, leader of West Oxfordshire District Council, said: “Although we have no funds with Heritable Bank this news is very positive, as only a month ago a story was published suggesting councils would lose 90 per cent of funds.

“Hopefully, this will be indicative that we will also get a substantial return of funds from the other banks when their details have been worked through with their administrators.

“Indeed, we’re still hopeful of a return in excess of the figures quoted for Heritable.”

A spokesman for the Vale of White Horse District Council said: “The announcement only refers to councils which had money with the English branch of Landsbanki.

“We’ve got £1m with Landsbanki and, with other councils, we’re being represented by the Local Government Association, which is expected to make an announcement within the next month.”

Oxfordshire County Council has deposits totalling £5m frozen in Landsbanki. A spokesman said: “We await further developments with interest and we will take nothing for granted until we have been given some certainty.”

A spokesman for Cherwell District Council said it had £6m tied up in Glitnir, but was still waiting to hear how much it would get back.

South Oxfordshire District Council had invested £2.5m in Iceland’s Kaupthing Singer & Friedlander bank.

A spokesman said: “In the light of the latest statement from the administrators for KSF bank, we remain optimistic about the prospects regarding our investment.

“However, at this stage there remains uncertainty about the timing and final value of any payment to us.”

Oxford University admitted last October that it had £30m invested with Landsbanki, Glitnir and Kaupthing Singer & Friedlander.

Thames Valley Police Authority had made a £5m deposit with Landsbanki.