Oxford University could face losses of up to £30 million which is tied up in Icelandic bank accounts, a spokesman confirmed today.
The university has admitted 5% of its cash deposits are invested in three banks and has now called on the regulator of universities to help solve the crisis.
Oxford is faced with the biggest loss as one of 12 universities across the country that had a total of £77 million in Icelandic accounts.
The money was deposited in crippled institutions Landsbanki, Glitnir and Kaupthing Singer and Friedlander. Some of the cash belonged to its 17 individual colleges, which put their money in a central fund controlled by the university finance committee.
Oxford's director of finance Giles Kerr said that colleges should be assured that the university's cash pool has more than sufficient liquidity to meet their requirements. He also said the university will make every effort to recover deposits in Iceland in full.
Oxford has £600 million in cash deposits and an overall endowment wealth of around £3.4 billion.
Mr Kerr has written to the Higher Education Funding Council for England (HEFCE) urging it to do all in its power to help protect the higher education sector from the impact of the crisis.
He said: "It is important that we get co-ordinated action and I know that HEFCE, DIUS (the Department for Innovation, Universities and Skills) and the Treasury are well aware of the challenges faced by the sector.
"We expect them to do all they can to protect the position of higher education institutions, which are vital to the country's future prosperity."
The university said it has made no Icelandic deposits in the last 18 months and the existing ones were made with institutions with fully assessed and approved creditworthiness.
It added that its policy has been, and remains, to have a wide portfolio of deposits to spread risk, and to review them regularly.
Mr Kerr said: "This is clearly a difficult time across the economy, and no one is immune. However, the finance committee is monitoring the situation closely and we are taking all necessary and available steps."
Oxford University is the latest public body hit by the Icelandic banking crisis.
Around 100 local councils, police forces and hospitals could also lose millions of pounds after investing in Iceland's troubled financial institutions.
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