Hospitals and universities yesterday became the latest victims of the collapsed Icelandic banks as the huge scale of taxpayers’ investments began to emerge.

At least ten universities have together invested tens of millions of pounds, and the Christie Hospital, the specialist cancer hospital in Manchester, was one of two foundation trusts that have admitted making deposits of £2 million, The Times has learnt.

The other, the Central and North West London, is one of the largest mental-health trusts in the country, serving eight London boroughs.

Chelsea Building Society also disclosed a £55 million exposure to Kaupthing and Landesbanki, the two Icelandic banks that failed this week.

Charity organisations revealed that more than £125 million had been deposited in the banks before an emergency meeting with Paul Myners, the City Minister, where they demanded protection for their assets.

Cats Protection emerged yesterday as the latest and biggest charity victim of the Icelandic banking crisis so far, with £11.2 million of its donations now at risk.

Earlier, senior officials from the Treasury, the Bank of England and the Financial Services Authority flew to Reykjavik for urgent talks with Icelandic authorities to try to sort out the crisis involving £1.2 billion of taxpayers’ money and 300,000 personal investors. But after the meeting with charities at the Treasury in London, ministers still refused to guarantee protection for public or voluntary bodies or pledge financial support. Charities and town hall organisations were told to gauge the extent of the crisis and come back next week with detailed figures of the amounts invested and the impact this would cause.

Whitehall officials refused to promise interim help and even started to talk down the limited package that had been offered to town halls on Wednesday night after it became clear that 108 councils had invested nearly £1 billion in Icelandic banks, a tenth of their total reserves.

University vice-chancellors are due to discuss the effects of the financial crisis at a scheduled board meeting today but sources said that at least ten universities are now facing losses of tens of millions of pounds from investments in failed Icelandic banks. Officials of the Higher Education Funding Council for England will work over the next two months to establish the effect of the financial crisis on university finances, looking particularly at the health of large investment funds controlled by the biggest institutions such as Oxford and Cambridge.

Monitor, the regulator overseeing the 107 NHS foundations trusts in England, admitted that at least two – the Christie and the Central and North West London – face potential losses totalling £2 million which was invested in Icelandic banks.

A spokesman for Monitor, which this week sent out a letter to foundation hospitals asking them to report on their investments, said patients’ services would be unaffected. Foundation trusts enjoy a degree of independence from central government control, with the freedom to manage their own budgets and investments.

Norman Lamb, the Liberal Democrat health sppokesman, said: “The first priority has to be that the Government supports hospitals to recover as much of their money as possible. We also need to know how much money NHS foundation trusts have exposed as deposits in commercial banks.”

Mike Penning, the Conservative Shadow Health Minister, said: “The Government needs to get a grip on this issue quickly, and work out how much NHS funding is exposed to the financial problems in Iceland.”

Earlier, Mr Myners asked the National Council of Voluntary Organisations (NCVO) to compile a definitive list of which charities were affected and by how much, and also a second list of charities whose losses could place vulnerable groups at risk if services have to be withdrawn.

After the meeting at the Treasury, John Low, chief executive of the Charities Aid Foundation, said: “They gave reassurance they would do their best to help, but there was not any guarantee, as we would have liked. There was no suggestion that there would ever be any guarantee, just that they would make best endeavours to support charities. But that was it.”

The NCVO estimates charities’ total exposure is at least £125 million. However, charities are also facing the prospect of a sharp fall in donations as households and businesses seek to cut their costs. 9 lives good; 90 days disaster

Case study

Plans for a new adoption centre for abandoned and unwanted cats in Leeds may seem a long way from the Icelandic banking crisis.

But the decision by the Cat Protection charity to place £11.2 million of its donations on deposit with Kaupthing Singer and Friedlander three years ago means the new adoption centre, and another in Belfast, are in jeopardy.

The demise of Lehman Brothers last month prompted the charity to move the cash and on September 17, it gave the bank the required 90-day notice that it would be withdrawing the funds. It heard on Wednesday that KSF had been put into administration. The Government has so far said it that will guarantee only those deposits held by individual investors.

The charity, which rehomes 55,000 cats a year through a network of 250 branches, has an annual income of about £35 million from individual donors and legacies, so day-to-day operations will not be affected.

Last night a spokesman defended the decision to have such large sums on deposit in a single institution. The £11.2 million on deposit represents only 16 per cent of the charity’s reserves. It also has money with Barclays, NatWest and the Coop.

Peter Hepburn, the chief executive, was upbeat, saying: “This news makes no threat to the charity’s ability to pay bills, salaries, or most importantly, provide for the cats in its care.”

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