The Herald's exposure of disinformation by the government on bank regulation was highlighted this week in the Treasury Select Committee's banking crisis inquiry.

It came as MPs heard how British citizens who went abroad to find work - in line with the government's latest mantra of job mobility - and who saved prudently for their retirement are the only Britons to have been abandoned by the government to lose their life savings.

Most victims of the Icelandic banking crash which brought down Kaupthing Singer & Friedlander Isle of Man (KSFIoM) and Landsbanki Guernsey were forced to open offshore accounts because of government rules, the committee was told. It heard how banks contacted by The Herald last November were puzzled at the claim made by treasury minister Ian Pearson - echoed by the chancellor - that there was "nothing in legislation" to prevent expatriates opening onshore accounts. Lloyds, for instance, told us: "To open a standard UK account, you need a UK address."

Neil Dickens, of the Landsbanki Guernsey Depositors Action Group, who cited our investigation, told MPs that his group had contacted 57 banks, only two of which would allow expatriates to deposit money, and only then if they were present at the time. Asked whether the banks were misinterpreting money laundering legislation, Dickens said that British citizens living in the Crown dependencies already faced rigorous investigations before they could open an offshore account with the same banks.

"They should allow British passport holders the right to open a bank account in the UK."

Ziggy Sieczko, representing the KSFIoM action group, said most depositors had moved abroad to work, for aid organisations or in roles such as structural engineers. "They are hard-working people who have done what the government told them to do."

Tony Shearer, former chief executive of Singer & Friedlander, told MPs he and several non-executive directors had warned the Financial Services Authority in 2005, when Kaupthing was taking over S&F, that they did not regard Kaupthing as a "fit and proper" owner of a UK bank. Shearer added that he had written to the FSA's new chief executive Hector Sants after he had taken over last year and claimed Northern Rock was "the only instance of regulatory failure" by the FSA. Shearer went on: "I did not receive a response. I thought I was genuinely doing him a favour, I thought what I would get would be a phone call saying pop round for a cup of coffee and a chat, tell me what you think and what you know. I got nothing other than a letter from a Miss Dunn."

Tony Brown, chief minister of the Isle of Man, told the committee they had a "memorandum of understanding" with the FSA which ought to have prevented the effective disappearance of £557m of KSFIoM depositors' money after it had been "upstreamed" to London. He said: "There was a total absence of any communications at their behest, we felt severely let down."

The 2000 Guernsey savers, 80% of whom are pensioners, have received only 30% of their money back, although there may be a further pay-out. The 10,000 in the Isle of Man bank are still waiting to find out whether a compensation scheme paying up to £50,000 will be allowed to kick in, or will be replaced by a scheme of arrangement which the island government has said will mean almost 30% of depositors losing up to 35% of their cash, and repayments possibly taking up to two years.

By contrast, the government moved immediately last October to guarantee 100% of the deposits, without limit, of almost 300,000 UK-based customers of Landsbanki, and of all offshore depositors with Bradford & Bingley.