A court order has been made to place Southsea Mortgage and Investment Company into the Bank Insolvency Procedure and appoint BDO LLP as the bank liquidator. Find out what this means for Southsea's customers.
The court order comes after we determined that Southsea does not meet the conditions for continuing authorisation, followed by an application from the Bank of England.
Southsea was a small bank with a portfolio of lending to fund housing developments in the local area. The bank's management have not been able to realise the value of Southsea's loans to fund these developments.
As a result Southsea was placed into the Bank Insolvency Procedure on 16 June 2011. The Financial Services Compensation Scheme (FSCS) has been triggered and eligible depositors with balances up to the limit of £85,000 have been safeguarded.
The FSCS is the UK's compensation fund of last resort for customers of authorised financial services firms. You can search our Register to find out whether a firm is, or was, authorised by us.
You do not need to contact the FSCS to apply for compensation – the FSCS will send your compensation to you automatically.
Any money deposited with Southsea above the FSCS limit of £85,000 will not be covered. The affected depositors will be treated like other creditors of the insolvency in relation to the remaining balance. See more on creditors below.
You can find out more about the compensation process in this case, including information about the FSCS eligibility criteria, on the FSCS website.
What it means for mortgage repayments
If you have a mortgage or other loan with Southsea you should continue to make repayments in the normal way. The insolvency practitioner, BDO LLP, will contact customers that hold a mortgage to explain what else you have to do. If anyone has any queries they should contact BDO LLP on 0207 486 5888.
However, you will be compensated for money deposited with the bank, up to the FSCS limit, regardless of any money owed to Southsea. An exception to this is if your savings or current account is combined with your mortgage account, and operates as a single overdraft.
What it means for joint accounts and ISAs
Provided you meet all the conditions to qualify for compensation, the FSCS can pay compensation up to the £85,000 limit to each person, per authorised firm. So if you have a joint deposit account you can each claim up to £85,000, for a combined total of £170,000.
Arrangements are to be put in place by HMRC which will ensure that customers who have ISAs with Southsea can transfer them to another institution while keeping their tax free status. This process will be managed separately to the FSCS payout. Further information can be found on the HMRC website.
Further information
Southsea will no longer be offering new products or renewing mortgages, but it will retain some permissions to enable the continued administration of mortgages. This will be reflected in the FSA Register.
If you had money deposited with Southsea and want further information on compensation arrangements, you can call the FSCS on 0800 678 1100 or 0207 741 4100, or visit the FSCS website.
A short list of FAQs below may also help you understand why Southsea was placed into the Bank Insolvency Procedure.
What is the Bank Insolvency Procedure?
The Bank of England was given powers under the Banking Act 2009 to apply to the court for a bank to be placed into the Bank Insolvency Procedure.
This is a special kind of insolvency which compels the liquidator to cooperate with the FSCS to quickly compensate depositors up to the FSCS limit.
Why was Southsea placed into the Bank Insolvency Procedure?
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.
This allowed us to initiate the Special Resolution Regime under the Banking Act 2009.
The court was satisfied that Southsea was unable, or likely to become unable to pay its debts.
What is the Special Resolution Regime?
The Banking Act 2009 created a Special Resolution Regime which gives the HM Treasury, Bank of England and FSA tools to deal with distressed UK banks and building societies.
Further information about the Special Resolution Regime is available on the Bank of England’s website.
Are other creditors eligible for compensation?
Other creditors of Southsea are not eligible for compensation under the FSCS, although they will be creditors in the insolvency.
Creditors should contact BDO to register their claim on 020 7486 5888 or the BDO LLP website.
Last updated: 16 June 2011
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