TROUBLED Manchester financial group London Scottish Bank, said today it was going to reduce the amount of money it lends as it faces a funding shortfall.

LSB said last month it would take a charge of up to £22m to cover losses at its unsecured consumer credit business and that as a result its regulatory capital would be £13ms short of the amount required by new banking rules.

It has since been in talks with thr FSA, the financial watchdog.

"The company has prepared and submitted to the FSA (Financial Services Authority) a plan to remedy the shortfall in its regulatory capital," the company said.

“One element of this plan involves reduced lending volumes until the shortfall in regulatory capital has been remedied.”

Shares in the company, which were trading at more than £1 per share until later last year, were down three per cent at 27p.