London Scottish Bank, the lender which specialises in customers with poor credit histories, plunged into administration this morning after regulators stopped the group from accepting customer deposits.

In a statement, LSB said it had sought an administration order yesterday and that Ernst & Young had been appointed as administrator.

London Scottish specialises in offering fixed-rate savings accounts and loans to customers with poor credit histories.

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.

The government pledged that no savers would lose money as a result of the bank’s collapse, even if their savings exceeded the £50,000 limit set by the Financial Services Compensation Scheme.

“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.

The Financial Services Authority had earlier ruled that LSB could no longer take deposits in light of the failure to secure its future.

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.

London Scottish Bank's unsecured consumer credit arm recorded a loss of £22.4m 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 £13m and said earlier this year it was seeking £45 million in equity capital from outside investors.

Visit www.high-interest-bond.com for customer information

Money Central: The five craziest mortgage deals ever

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts