A spokesman confirmed the force authority has £6m invested.

The risk attached to those investments had been spread, following the authority's investment strategy, the spokesman said.

He said: "The strategy places security above return. It is normal practice for the public sector to hold deposits in overseas banks . These are exceptional times for the financial sector world-wide and we are currently assessing the impact on services of the recent developments with Icelandic banks."

Wakefield Council also admitted it has £9m invested in struggling Icelandic banks.

Wakefield Council chief executive, Joanne Roney, said: "These are exceptional times and we are assessing the impact on services.

"(The money] was invested at a time when their credit ratings were highly ranked. It is normal practice for the public sector to hold deposits in overseas banks. We are working with the district's MPs to resolve the situation."

Council tax payers in Leeds and North Yorkshire have been assured that the local authority has no investments in Icelandic banks.

Kirklees said it has £1m invested in Iceland bank Landsbanki which is due to be repaid in January. Coun Andrew Palfreeman, cabinet member for finance and governance, said: "The Icelandic government has said the bank will run as normal so we expect the investment to be repaid and will be working to secure this."