Asian bank in administration: Roxburghe closes its doors after run on deposits

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FEARS of a run on UK banks serving the Asian community escalated yesterday with the move into administration of the small London-based Roxburghe Bank.

Roxburghe is the fourth British bank catering for Asians to announce closure in recent months.

A run on deposits caused its two branches, in Hounslow, Middlesex, and Regent Street, London, to shut their doors yesterday after calling in the chartered accountants Price Waterhouse as administrators.

Roxburghe's depositors are numbered in hundreds and live mostly in India and Kenya. Tony Lomas, of Price Waterhouse, said that of the bank's pounds 40m on deposit about half was in interbank markets and half on loan to small Asian businesses in South-east England.

Other Asian community banks facing difficulties recently include Mount Banking Corporation, which went into provisional liquidation last October but later was taken into administration by the Bank of England. Equatorial Bank went into liquidation on 19 March.

The management of the Islamic bank Albaraka decided to close after it failed to satisfy the Bank of England about its ownership structure.

Mr Lomas said that Roxburghe Bank's problems appeared to have blown up in the past two months and accelerated in March when withdrawals increased rapidly.

Its directors decided to put the bank into administration because they expected the rate of customer withdrawals to outstrip its ability to fund itself by the end of April.

'The directors assume the increased withdrawal of deposits is associated with the general decline of the Asian banking community,' he said. Roxburghe's customers can no longer make cash withdrawals after yesterday's closure.

Stockbrokers' analysts said that the demise of the Asian community banks reflected a flight to quality following the closure of the fraud-infested Bank of Credit and Commerce International.

Mr Lomas and Roxburghe's directors have been in consultation with the Bank of England, which would not comment. But, when judging whether to intervene to stop bank failures, the Bank looks at the relative size of the institution among other factors. Roxburghe's total assets are only pounds 46m.

Mr Lomas and his joint administrator, Colin Bird, will write to depositors and borrowers to inform them of the administration, which aims to sell the assets of the bank in an orderly fashion. Mr Lomas could not predict the level of return to creditors but said a significant proportion of the bank's assets were cash deposits which should be readily realisable.

The Bank of Credit and Commerce International was closed after massive fraud was discovered in July 1991. Its closure triggered a liquidity crisis among UK second-tier lenders which resulted in the Bank of England urging UK clearers to extend a pounds 200m lifeboat to the small lenders.