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British Bank Allowed To Fail

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Southsea Mortgage and Investment Company Limited

16 June 2011

Following a decision by the Financial Services Authority (FSA) to initiate the special resolution regime (SRR), and a subsequent application to court by the Bank of England, Southsea Mortgage and Investment Company Limited (Southsea) has been placed into the Bank Insolvency Procedure and BDO LLP (BDO) has been appointed bank liquidator. As of today, Southsea has therefore ceased trading.

The failure of Southsea, a small bank with just over 250 depositors, follows a deterioration in its financial position as a result of management decisions and the firm’s specific business model. At failure, the firm had retail deposits of £7.4 million.

The Financial Services Compensation Scheme (FSCS) is in place to protect eligible deposits up to the insured limit of £85,000. As a result of Southsea entering the SRR, the FSCS will pay compensation to each eligible depositor up to the limit of £85,000. In order to minimise disruption and to provide access to funds, the FSCS intends to make its payout as quickly as possible. Retail depositors do not need to contact the FSCS to receive a payout as the FSCS will be contacting them. Further details about the payout, including information about whether deposits are eligible, can be found at www.fscs.org.uk or by calling the FSCS on 0800 678 1100 or 020 7741 4100. Eligible depositors with amounts in excess of the insured limit of £85,000 may be entitled to receive a share of their savings above this limit, as part of the insolvency process.

Depositors who are not covered by the FSCS will, like other creditors of Southsea, be able to claim in the insolvency. Such creditors should contact the bank liquidator, BDO, to register their claim on 020 7486 5888.

Anyone with mortgages or loans from Southsea should continue to make repayments and service their debts in the normal way. If they have any queries, they should contact BDO using the telephone number above.

http://www.bankofengland.co.uk/publications/news/2011/060.htm

Getting a bit of practice in ready for some bigger ones?

Edited by Redhat Sly

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Getting a bit of practice in ready for some bigger ones?

How many of these small banks have failed over the last three years? I assume a fair few?

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British Bank Allowed To Fail - £85k FSCS scheme kicks in.

I see your deliberate mistake there. Actually allowing a bank to fail would involve not bailing people out.

My oh my, then risk might have a chance of being priced correctly. Imagine that.

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British Bank Allowed To Fail - £85k FSCS scheme kicks in.

I see your deliberate mistake there. Actually allowing a bank to fail would involve not bailing people out.

My oh my, then risk might have a chance of being priced correctly. Imagine that.

At least they've changed their policy on the bailouts of all deposits. There is more risk exposure there now.

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Is it really called South Sea?

*really*?

That was exactly what I was thinking. I even wondered if I'd mis-remembered the South Sea Company - but I hadn't.

It is coincidences like these that make me wonder if these 'humourous' names aren't circumstantial evidence for a criminal conspiracy... where the insiders perpetrating fraud are so arrogant that they can resort to amusing memorable names. It makes me wonder - especially as the number of these curious resonant coincidences seems to correlate remarkably well with failed financial enterprises.

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Eligible depositors with amounts in excess of the insured limit of £85,000 may be entitled to receive a share of their savings above this limit, as part of the insolvency process.

Depositors who are not covered by the FSCS will, like other creditors of Southsea, be able to claim in the insolvency. Such creditors should contact the bank liquidator, BDO, to register their claim on 020 7486 5888.

BoE have chosen a bit part player to put down a marker and , one assumes, to test the outcome.

Is this the first time in this crisis UK depositors will have taken a capital loss?

It would be very interesting to know how many depositors had more than £85k at risk in Southsea and to what value.

It reinforces my long held view that any depositor with > FSCS limits in the major UK banks needs to understand the risk they're taking and needs to think about whether they really want to give their money to people like Bob Diamond for safe keeping.

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BoE have chosen a bit part player to put down a marker and , one assumes, to test the outcome.

Is this the first time in this crisis UK depositors will have taken a capital loss?

It would be very interesting to know how many depositors had more than £85k at risk in Southsea and to what value.

It reinforces my long held view that any depositor with > FSCS limits in the major UK banks needs to understand the risk they're taking and needs to think about whether they really want to give their money to people like Bob Diamond for safe keeping.

Hi

The articles says there were 250 depositors with total balances of £7.4m - this gives an average of £29,600 per depositor. This average balance does seem very high and it's therefore likely that there are some substantial deposits above £85k to bring up the average to this sort of level??

Will be interesting to follow this story but as you say, I just can't comprehend how anyone would have over the £85k limit on deposit?

M21er

Edit: Spelling

Edited by M21er

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British Bank Allowed To Fail - £85k FSCS scheme kicks in.

I see your deliberate mistake there. Actually allowing a bank to fail would involve not bailing people out.

My oh my, then risk might have a chance of being priced correctly. Imagine that.

Would nt that cause a run on ALL banks given they are all, in reality, insolvent?

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Hi

The articles says there were 250 depositors with total balances of £7.4m - this gives an average of £29,600 per depositor. This average balance does seem very high and it's therefore likely that there are some substantial deposits above £85k to bring up the average to this sort of level??

Will be interesting to follow this story but as you say, I just can't comprehend how anyone would have over the £85k limit on deposit?

M21er

Edit: Spelling

Thanks M21er I missed that.

It does seem very odd in this particular case given the size of the 'bank'. Perhaps there are some unusual specific circumstances.

Found this

Southsea is a small bank with just over 250 depositors. At failure, the firm had retail deposits of £7.4m.

The Bank says the failure of Southsea follows a deterioration in the bank's financial position, as a result of management decisions and the firm's specific business model.

Money Marketing understands the company was offering loans to property development companies, who then began to default on their loans in 2008.

Southsea planned to develop the land acquired by developers itself to pay depositors and creditors, but found itself unable to do so as a result of the downturn in the property market during the financial crisis. This then triggered the FSA and Bank's involvement and the process of winding down the company.

Customers of Southsea will be entitled to compensation of up to £85,000 each. They will not need to contact to the FSCS to apply for compensation as the FSCS will send their compensation automatically.

There are 14 customers who had savings with Southsea of over £85,000. The FSCS says it will pursue recoveries through the insolvency process, to try and recoup the remaining balance for savers.

http://www.moneymarketing.co.uk/regulation/bank-closure-triggers-fscs-payout/1032932.article

Is there some sort of 'wheeze' going on here?

Get a couple of hundred people together, set up as a 'bank' with the FSA, invest 'depositors' cash in (in this case) property development, then if the whole thing goes t1ts, the FSCS pick up the tab up to £85k in individual cases.

Of course I'm speculating here and am in no way suggesting in this particular case that is what happened. It's also not very dissimilar to what Anglo Irish for instance were doing but on a much bigger scale.

Edited by Red Karma

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Thanks M21er I missed that.

It does seem very odd in this particular case given the size of the 'bank'. Perhaps there are some unusual specific circumstances.

Found this

http://www.moneymarketing.co.uk/regulation/bank-closure-triggers-fscs-payout/1032932.article

Is there some sort of 'wheeze' going on here?

Get a couple of hundred people together, set up as a 'bank' with the FSA, invest 'depositors' cash in (in this case) property development, then if the whole thing goes t1ts, the FSCS pick up the tab up to £85k in individual cases.

Of course I'm speculating here and am in no way suggesting in this particular case that is what happened. It's also not very dissimilar to what Anglo Irish for instance were doing but on a much bigger scale.

Indeed. 250 depositors isnt exactly a 'small bank', more an large crime family.

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There is a hell of a lot of capital on deposit out there, i bet there are hundreds of thousands with sums greater than the £85k limit, i know for one, an ex pub landlord who sold up all and sundry, and has circa hallf a million sitting in the Nationwide, i know because he tells everyone, also i know of an expat returning with close to £350k in the Nationwide. For some reason they think its cast iron safe....................

Me thinks if the Nationwide, or the Yorkshire went t!ts up, and all these people lost hundreds and thousands of pounds, things might heat up a bit?

Could be great viewing? Better get it spent before it goes and whistles hey? They are trying there damndist to get you to spend it ai'nt they?

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There is a hell of a lot of capital on deposit out there, i bet there are hundreds of thousands with sums greater than the £85k limit, i know for one, an ex pub landlord who sold up all and sundry, and has circa hallf a million sitting in the Nationwide, i know because he tells everyone, also i know of an expat returning with close to £350k in the Nationwide. For some reason they think its cast iron safe....................

When a relative moved house, the transaction happened in such a way that around £200k was sitting his account for just under a month, between selling the place he was moving from and buying the one he moved into. On the conveyancing solicitor's advice, he bought an insurance policy specifically to cover that sum of money (against bank failure, electronic theft, etc.) during that time. It cost him around £30. Presumably your ex-landlord could do the same thing?

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That was exactly what I was thinking. I even wondered if I'd mis-remembered the South Sea Company - but I hadn't.

It is coincidences like these that make me wonder if these 'humourous' names aren't circumstantial evidence for a criminal conspiracy... where the insiders perpetrating fraud are so arrogant that they can resort to amusing memorable names. It makes me wonder - especially as the number of these curious resonant coincidences seems to correlate remarkably well with failed financial enterprises.

Indeed.

http://www.newmarketjournal.co.uk/news/regional/two_jailed_over_mortgage_scam_1_2772521

Saghir Ahmed Afzal is an anagram of Game is half hazard

and Ian McGarry is an anagram of Racy Margin

In this case though the banks are to blame for having "trusted" surveyors and not actually sending anyone to check the places out.

AND the land registry should have picked up on the bakc to back sales occuring and queried it.

Edited by SarahBell

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Guest eight

When a relative moved house, the transaction happened in such a way that around £200k was sitting his account for just under a month, between selling the place he was moving from and buying the one he moved into. On the conveyancing solicitor's advice, he bought an insurance policy specifically to cover that sum of money (against bank failure, electronic theft, etc.) during that time. It cost him around £30. Presumably your ex-landlord could do the same thing?

The insurance company pay you out from a contingency fund they keep in........ well, where?

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That was exactly what I was thinking. I even wondered if I'd mis-remembered the South Sea Company - but I hadn't.

It is coincidences like these that make me wonder if these 'humourous' names aren't circumstantial evidence for a criminal conspiracy... where the insiders perpetrating fraud are so arrogant that they can resort to amusing memorable names. It makes me wonder - especially as the number of these curious resonant coincidences seems to correlate remarkably well with failed financial enterprises.

Or perhaps Southsea is simply the area of Portsmouth where they're based.

Occam's razor and so on.

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There is a hell of a lot of capital on deposit out there, i bet there are hundreds of thousands with sums greater than the £85k limit, i know for one, an ex pub landlord who sold up all and sundry, and has circa hallf a million sitting in the Nationwide, i know because he tells everyone, also i know of an expat returning with close to £350k in the Nationwide. For some reason they think its cast iron safe....................

Me thinks if the Nationwide, or the Yorkshire went t!ts up, and all these people lost hundreds and thousands of pounds, things might heat up a bit?

Could be great viewing? Better get it spent before it goes and whistles hey? They are trying there damndist to get you to spend it ai'nt they?

And some places share the same FSCS licence.

http://www.fsa.gov.uk/pages/consumerinformation/uk_groups/index.shtml

And being registered with the FSA is not the same as being regulated by the FSA. Firms with a turnover of less than £2.5m a month can say they are authorised by the FSA but do not have to keep clients funds safe.

http://news.sky.com/skynews/Home/Business/Two-Arrested-For-Crown-Currency-Collapse/Article/201012115849407?lpos=Business_Second_Buisness_Article_Teaser_Region____4&lid=ARTICLE_15849407_Two_Arrested_For_Crown_Currency_Collapse

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