London Scottish Bank's debt collection arm to be sold: Report

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London : Ernst & Young, the newly appointed administrator of the collapsed London Scottish Bank, is preparing to sell the bank's profitable debt collection arm, Robinson Way, a media report says.

"It is understood that the administrator is preparing an information memorandum to send to interested bidders and will formally auction the business within weeks," The Times said.

A number of private equity and trade bidders have expressed an interest in Robinson Way, which made a profit of 6.3 million pound in the six months ended October 30, it added.

LSB was forced to call in the administrators after it failed to fill a huge shortfall in funding and could not find a buyer. The Financial Services Authority (FSA) ruled that the bank could no longer take deposits in light of the failure to secure its future.

LSB has become the first UK bank to collapse as a result of the credit crunch and government has guaranteed the deposits of thousands of customers with the bank.

According to The Times in a report on its website, the government pledged that no savers would lose money as a result of the banks collapse, even if their savings exceeded the 50,000 pound limit set by the Financial Services Compensation Scheme (FSCS).

It is unclear what would happen to the group's borrowers, although the FSA emphasised that they are requested to continue with repayments until further notice, it noted.

In the six months ended April the bank had unveiled a loss of 7.4 million pound from its consumer credit business and bad debts.