Sutton Council continued sinking deposits into an Icelandic bank when 72 other local authorities had stopped risking taxpayers’ money.

New figures released under the Freedom of Information Act show several UK councils ignored a credit rating warning last February.

But Sutton was one of only three local authorities that took advantage of market-beating interest rates after September 29, a Channel 4 documentary has discovered.

As previously disclosed, it invested a final £2m sum in the Heritable institution on September 30, the day the Icelandic government took control of the country’s third largest bank, Glitnir.

David Scott, cabinet member for finance at Ealing Council, acted when the Fitch credit agency first put Icelandic banks on “negative watch”.

He said: “I suppose other councils kept putting money in because they didn’t have their eye on the ball enough, or were just generally unaware.”

Sutton Council admitted that Sector, its treasury management adviser, did consider the credit ratings supplied by Fitch.

Councillor John Drage, the executive member for resources, said criteria for investment had now been tightened.

He said: “An independent review found that the way we invested money was in line with best practice in local government.

“However, the review also found that, while the investment strategy worked well under normal conditions, it was unable to cope with the unprecedented crisis that engulfed the world’s financial markets last year.”

Coun Tim Crowley, Conservative opposition finance spokesman, said: “Finance bosses from councils up and down Britain saw the vulnerability of Icelandic investments, but Sutton didn’t until it was too late.

Gylfi Magnusson, Iceland’s new minister for business affairs, has refused to guarantee money will be returned to councils with assets frozen there.

But Sutton Council is confident of a “material payout” because Ernst and Young are handling the administration of Heritable in the UK.