Wimbledon depositors prepare for a long wait: Sue Fieldman looks at the effect of a small London bank's slide into administration

DEPOSITORS with Wimbledon and South West Finance, the small London bank that has gone into administration, will have a long wait before they can get any of their money back.

There are about 2,500 savers, all of whose deposits are now frozen.

Max Shepherd from London and his family have more than pounds 4,000 with Wimbledon. Mr Shepherd's only consolation as he waits is that his wife withdrew pounds 5,000 from Wimbledon a month ago. He has also spread his money around so that only a percentage was with Wimbledon.

Mr Shepherd says: 'My wife has a cheque account with them. Luckily there is only about pounds 2,200 left in it. It could have been worse. But my daughter has pounds 2,000 in a deposit account. She is 25, and she was hoping to buy a flat this year.'

Mrs Shepherd's withdrawal was a stroke of luck. She and many other investors did not have an inkling that there was a problem at Wimbledon until last week.

The Independent revealed at the beginning of last November that Wimbledon had drastically cut back its lending. Three weeks later we reported that it was not taking any new investments.

At the time Robin Eve, a spokesman for Wimbledon, said: 'There was nothing sinister at all' about the restrictions. He said the bank was still active in deposits, with about pounds 20m of depositors' money.

Mr Eve was at pains to point out that the bank was not under any restraint from the Bank of England either on lending or deposit-taking.

A Bank of England spokesman said he was unable to comment on the bank's supervisory role.

Depositors will no doubt be asking why the Bank of England did not act sooner. There were obviously problems at Wimbledon in November, but the Bank let it ride for nearly four more months. Meanwhile, existing depositors could freely add to their deposits oblivious to the disaster around the corner.

When a bank collapses or goes into administration, there is a deposit protection scheme run by the Bank of England. It only pays 75 per cent of any savings, with a maximum savings level of pounds 20,000 - a maximum pay- out to any one depositor of pounds 15,000.

When a bank is in administration, the scheme cannot even get up and start running until creditors agree on the proposals put forward by the administrator.

Malcolm Cohen, of the chartered accountants Stoy Hayward, is acting as administrator. He was appointed by the Wimbledon directors, with the consent of the Bank of England.

He is anxious to call a meeting of creditors as soon as possible to trigger the scheme, but it will take some weeks. 'We are working frantically to ascertain the situation,' he said.

Even when the protection scheme is triggered, payments are not automatic. Claims have to be submitted and considered. Realistically, it could be several months before the first pay- outs are made.

Investors who lost money in the collapse of the Bank of Credit and Commerce International had to wait many months for their deposit protection pay-outs because of the delays in the final liquidation of the company. To date, pounds 75m has been paid out to 20,000 BCCI claimants.

Investors were attracted to Wimbledon because it consistently offered higher interest rates. But higher reward frequently means higher risk.

If you do chase higher rates with smaller financial institutions, beware. Keep your investments relatively small - under pounds 20,000. Then at least if problems do arise you are protected for most if not all of your money.