All Bradford Council schools with funds in Yorkshire Bank have been ordered to immediately empty millions from their accounts due to fears it is too small to be safe in the current financial climate.

The surprise move is revealed in a secret, urgent letter to 150 Council-run schools, seen by the Telegraph & Argus.

Andrew Redding, of the Council’s School Funding Team, wrote to head teachers and governors last week and began: “This letter requires your immediate attention.”

Historically, the district’s schools had close ties with Yorkshire Bank, which holds two-thirds of school budget cash balances and, said Mr Redding, had always been a successful relationship.

But he writes that because of “continuing turbulence in the banking sector” finance bosses have decided funds should only be held with the four largest UK clearing banks, Barclays, HSBC, Lloyds TSB and RBS(NatWest).

Urging schools that “there is no need to panic,” Mr Redding nevertheless details the immediate action they must take: “If you hold school budget balances with any other bank then you will be required to move these balances.”

The letter goes on to say: “Holding two-thirds of school budget balances and with one bank constitutes an unacceptable level of cumulative risk.”

Referring to the Yorkshire Bank, Mr Redding writes: “In addition, the current rating and size of this bank means that this bank does not comply with the Council’s Treasury Management policy.”

He said the aim was to evenly distribute the school balances across all of the big four banks.

A spokesman for Yorkshire Bank, owned by the National Australia Bank since 1990, said he was aware of the Council’s decision, having also been leaked a copy of the letter.

“We fully appreciate their position and understand the background to it. We do not handle big deposits from local authorities and this will only have a negligible effect on our business – a fraction of a per cent,” he said.

Councillor Ralph Berry, the executive member for children’s and young people’s services, said: “We are working together to make sure our finances are secure.”

e-mail: chris.tate@telegraphandargus.co.uk