THE severity of the economic downturn has prompted Honiton Town Council to reconsider its banking arrangements.

THE severity of the economic downturn has prompted Honiton Town Council to reconsider its banking arrangements.Members of the council's policy committee on Monday heard how the sharp fall in interest rates had reduced the authority's monthly return on balances from �400 to around �15.They were also reminded that the Government will only guarantee balances of up to �50,000 and that the safest way to protect ratepayers' money was to spread it between several banks.Although happy with the service provided by Lloyds TSB, which town clerk Lyn Hargood praised, councillors pondered over the question: what if a major bank was to collapse?The average sum held by Lloyds TSB on behalf of the council is �120,000.Mrs Hargood made a number of recommendations, including setting up a high interest (currently 0.9 per cent) account with HSBC.Councillor Michael Teare believed the council should spread its money about - to get the best return and guarantee its safety, should the worst happen.He suggested Mrs Hargood approach other banks and possibly building societies to find out more."What if there was a collapse of that bank?" he asked. "We would only be guaranteed for �50,000."Town and district councillor Peter Halse said: "Interest rates are ridiculously low. "I think spreading the risk would be a very worthwhile thing."Deputy mayor Councillor Vivienne Ash praised Mrs Hargood for taking the initiative.The committee adopted her recommendations, but suggested she contact other financial insti-tutions and report back in three months.