CITY council finance chiefs have acted to safeguard the Town Hall's deposits in the face of the global credit crunch.

Reduced lending limits had already been placed on a restricted list of banks and building societies in which they deposit cash and a number of banks and building societies had been struck off the approved list.

Resources portfolio holder Cllr Adrian Walmsley (Con, Newton St Michael's) told a meeting of the full City Council in a report that all the approved institutions to which the council restricts its lending have a top credit score which is updated daily.

"If at any point ratings fall below our lending criteria, then these banks/building societies are removed from our lending list.

"In addition we set maximum lending limits to individual organisations," says Cllr Walmsley.

He added:"Given the global credit crunch and the impact on financial markets and individual institutions, we have reviewed our policies on approved organisations, investment periods and limits to minimise further risks."

He revealed the council now only lends to UK financial institutions and to other local authorities.

In the first instance Town Hall cash is lent to some UK banks and the Nationwide Building Society which have a government guarantee.

Cllr Walmsley emphasises the security of the council's cash "is of primary importance" and only then is the amount of interest earned taken into account.

Since February last year, the National Westminster Bank, Bradford and Bingley and the Alliance & Leicester have been removed from the council's approved list together with banks in Denmark, Luxembourg, France, Germany, Belgium and Ireland.

More recently the beleaguered Royal Bank of Scotland and the remaining Irish banks have also been struck off.

Building societies which have been removed include The Britannia, the Principality and the West Bromwich with more recently the Yorkshire, Skipton, Chelsea and Newcastle societies.

Banks to which the council lends have been reduced to Barclays, Lloyds TSB, the Bank of Scotland, the HSBC Bank, Abbey National and Standard Chartered.

The building societies remaining on the list are the Nationwide, Coventry and Leeds.

Although the city council lends other local authorities up to £10m each unless there is concern, it normally limits deposits with banks to £6m each (up from £4m) and most building societies on the list to £3m (up from £1m) for a maximum of three months.

The limits have had to be increased due to the reduction in the number of deposit takers which are approved.

Apart from the Nationwide, which has a £6m limit (up from £4m), Cllr Walmsley says the council only lends to the remaining two building societies if it cannot lend to the other approved institutions.

Vicars Cross Cllr Graham Proctor (Lib Dem) successfully moved that a reference to lending to other councils "except where there is a commonly known concern" should be changed to read "except where there is concern."

This was accepted by Cllr Walmsley.

Labour leader Cllr John Price (Blacon Hall) pointed out the issue would become a matter for the new Cheshire West and Chester Council.