London Scottish Bank, which specialises in unsecured consumer lending and debt collection, has gone into administration after the Financial Services Authority (FSA) stepped in to stop it accepting deposits. The FSA acted because London Scottish did not have the amount of cash it needed to continue operating.

HM Treasury issued a statement saying that all retail depositors would get their money back, even those with more than £50,000 in their accounts. Officially, only the first £50,000 is supposed to be protected. The accountancy firm Ernst & Young has been appointed as the administrator.

The government said retail depositors who are eligible would receive their money in full when the term of their deposit matures. They will need to apply to the Financial Services Compensation Scheme (FSCS) to receive compensation. Those whose savings are protected include most private individuals and some small businesses and charities.

Wholesale depositors are not eligible for FSCS compensation although they will be creditors in the administration. Creditors should contact the administrator Ernst and Young, according to a statement on the London Stock Exchange today.

''The Chancellor has put in place arrangements to ensure that all eligible retail depositors in London Scottish Bank will receive their money in full, including those with balances above the current 50,000 pound FSCS limit,'' the Treasury said in a statement. It added that it ''taken decisive action to protect the interests of retail depositors and wider financial stability.''

In February, London Scottish announced it was ending its lending business to focus on its debt collection unit, Robinson's Way. It specialised in council right-to-buy mortgages and those for high-rise flats. London Scottish had been looking for a buyer for the group, but said there was no certainty that its discussions would lead to an offer being made.

With around 10,000 savers, the bank has some £250 million in customer deposits and employs around 700 people. In the six months to April 2008, it unveiled losses of £7.4 million. Its unsecured consumer credit arm recorded a loss of £22.4 million last year and in May it was forced to close its loan broking operation. The group started 2008 with a regulatory capital shortfall of approximately £13 million and said earlier this year it was seeking £45 million in equity capital from outside investors.

Shares in the group were suspended today at 2.62p having lost almost all of their value amid its financial problems over the past year. The company added that an unspecified number of suitors were still interested in buying the company, but that it was unclear if a firm offer would materialise.