Question mark over LSB payouts
SOME companies and charities that saved money with the failed London Scottish Bank could be left out of pocket, according to a new report.
The majority of the bank’s savers, who deposited a total of £256m, will get their money back under the Financial Services Compensation Scheme (FSCS).
But a report by administrators at Ernst & Young, who are handling the bank’s affairs, said around £500,000 held by corporate entities and charities, “is not automatically subject to FSCS cover”.
It added: “We understand that the FSCS is reviewing this position in order to assess these balances for potential repayment.”
Under the scheme savers have £50,000 guaranteed and in the case of London Scottish – the first British bank to fail in the credit crunch – the Treasury has promised to compensate those with more than £50,000.
However, companies and charities only qualify if they meet certain eligibility criteria. The FSCS said it could not comment on individual cases.
The bank collapsed in December after failing to plug a £32.5m shortfall in capital. It became bogged down in rising levels of bad debt and a last ditch attempt to find a buyer for the business failed.
As well as accepting deposits LSB provided loans, principally through door-to-door collection, and operated a debt collection service through its Salford-based Robinson Way subsidiary.
The administrators said the Robinson Way business was “highly profitable” and remains outside the insolvency process. Ernst & Young is now working on the sale of the business.
The bank’s mortgage book, valued at £79m, is also up for sale and has attracted 35 expressions of interest.
Most of LSB’s creditors are its depositors and the administrators said they were confident that unsecured creditors – owed a total of £30.8m – would receive a dividend. One of the largest creditors is HM Revenue & Customs, owed £2.4m.
London Scottish Bank started out in the early 20th century as a Wigan-based money lending business providing short-term loans to mill workers. It later relocated to Manchester and floated on the London Stock Exchange in 1987.
A creditors’ meeting will be held in Manchester on Friday.
