Few people in the remote Norwegian town of Narvik, 200km north of the Arctic Circle where the sun has disappeared until January, were likely to have given a lot of thought to the credit squeeze sweeping the global money markets – that is, until it threatened their wages over Christmas.

Narvik, along with three other similarly isolated towns of Hemnes, Rana and Hattfjelldal, has become the latest community to discover just how directly even the most remote places can be affected by the financial turmoil after it made multi-million dollar bets on complicated US-linked financial products.

The towns invested about $96m (€65m) in complex products linked to unspecified municipal bonds in the US, designed by Citigroup, and sold to them by Terra Securities, the investment banking arm of one of Norway’s leading banking groups.

Now representatives of the towns have admitted that recent market movements linked to the credit crisis had destroyed most of the value of their investments.

Arne Sørensen, leader of the Hemnes municipal government, said the town faced total possible losses of NKr170m (€21m), but he was hoping to close the positions with losses of about NKr55m.

“We can live through it,” he said with Norwegian stoicism. “It’s serious, but not tragic.”

He told the Financial Times he feels badly served by Terra and the way it got his town of 4,500 residents to buy the products. “Terra gave us two documents, one in English and one in Norwegian. We only read the Norwegian one, but it seems there is a huge difference between the two as the Norwegian document didn’t disclose all of the risks.”

He added the town “wanted to read both documents before signing”, but Terra “said we only had a few days to make a decision”.

Friday night, Terra rejected the criticism, saying: “The client was presented [with] the English presentation as well as the Norwegian summary.

“Putting the municipality of Hemnes under time pressure is new to us, and on which we have not seen supporting evidence.”

Mr Sørensen admitted Hemnes bore some of the responsibility but added the town had sought legal advice on the issue.

The Norwegian ministry of finance has asked the country’s main financial regulator to investigate the affair. A report is due in a couple of weeks.

Citigroup said it “is confident the risks of investing in the notes were described in the materials provided to Terra Securities”.

Terra is the investment banking arm of a group of 78 local savings banks in Norway. The group is the main source of financing for many local communities and there is a deep tradition of trust between the towns and the bank.

Terra said in a previously published statement that the products had generated good returns until severe market movements “damaged” the investments.

The group added the affected towns have “responsibility” for their decisions, but emphasised that it would seek a solution and was in talks with town representatives.