FSCS called in as bank is shut down
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The FSA and the Bank of England have shut down a small Havant-based bank with retail deposits of £7.4m, triggering compensation payouts from the Financial Services Compensation Scheme.
Southsea Mortgage and Investment Company ceased trading last week following a decision by the FSA to initiate the special resolution regime, which allows the regulator to wind down failing banks and building societies.
The BoE then applied to place Southsea into insolvency, with BDO appointed as bank liquidator.
Southsea is a small bank with just over 250 depositors. Money Marketing understands the company was offering loans to property development companies, which began to default on their loans in 2008. Southsea planned to develop the land bought by developers to pay depositors and creditors but was unable to do so as a result of the financial crisis.
Customers are entitled to compensation of up to £85,000 each. Most savers have already received their compensation.
The FSCS will pursue recoveries through the insolvency process to recoup the remaining balance for the 14 customers who had savings over £85,000 with Southsea.
The FSA says: “The steps to place Southsea in the bank insolvency procedure came after we found the bank was not meeting its regulatory requirements and can therefore no longer continue to operate as an authorised deposit-taker.
“The court was satisfied that Southsea was unable or likely to become unable to pay its debts.”
The FSCS says: “Anyone with mortgages or loans from Southsea should continue to make repayments and service their debts in the normal way.
“Customers of the firm will be contacted in due course and advised how loan and mortgage repayments will be handled in future.”
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Readers' comments (1)
Julian Stevens | 24 Jun 2011 1:07 pm
Why is it that so many people fail to learn from events of the past? All booms lead ultimately to bust and by the time you become aware of a particular sector booming, you've almost certainly missed the boat. The only people who make money out of booms are those who get in before the market really takes off.
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