London Scottish Bank Fails; ARM Unit Fate Unclear

Manchester, U.K.-based London Scottish Bank was forced into administration Monday by British banking regulators, the rough equivalent of a bank failure in the U.S.

London Scottish was a lender that focused primarily on subprime and low income borrower loans. The company announced in February that it would discontinue its lending operations to focus on its profitable accounts receivable management business, which operates under the name Robinson Way (“UK Bank to Stop Lending, Focus on Debt Purchasing and Collection,” Feb. 27).

The company then announced in June that it had entered into a $160 million credit facility to funding receivables purchases (“UK Debt Buyer Gets $165 million Credit Facility for Portfolio Financing,” June 2). But the credit facility carried specific capital requirements that, if unmet by October 31, would require the sale of Robinson Way or the entire company.

 The bank was unable to remedy a capital shortfall from earlier in the year and was forced into administration.

However, London Scottish said in a statement Monday, “A number of parties remain interested in acquiring the group.”

The U.K.’s Financial Services Authority said that the bank, despite having as many as 200,000 loan customers, reported only 10,000 depositors with total deposits of around $375 million. Deposits up to £50,000 will be covered by the government.

The bank’s Robinson Way ARM business was profitable last year, with an income of $27 million on revenues of $66 million.