'Reckless' Bank of England accused over BCCI
The Bank of England has been accused of 'knowingly or recklessly' failing in its supervisory role over the failed bank BCCI, by lawyers acting on behalf of liquidators Deloitte.
bold: Deloitte pays back 90% to BCCI creditors
In what is expected to be a mammoth legal battle, London’s High Court was told that the Bank of England licensed BCCI when it had not met the Banking Act criteria, and that it had then put its own self-interest first in refusing to supervise the failed bank.
Gordon Pollock QC, appearing for Deloitte, said: ‘Despite the fact the Bank recognised time and again – you see it in documents again and again and again – that the only satisfactory route for protection of depositors was for the bank to undertake supervision themselves, the golden thread of its policy was an absolute determination not to take over supervision of BCCI.’
Deloitte is seeking £1bn in damages from the Bank of England for creditors of BCCI, which collapsed in 1991 owing £5.1bn. Former Bank of England governor Sir Eddie George is expected to give evidence in the case.
Addressing the court, Pollock said that senior officials at the Bank of England knew that BCCI’s own internal supervision was weak. ‘They knew before licensing that BCCI was very dangerously supervised. That necessarily involved an unquantifiable but very obvious risk,’ he said.
In 1998 BCCI’s auditors at the time, Price Waterhouse and Ernst & Whinney, reached settlement with Deloitte in agreeing to pay $195m (£106m) in damages between them.
‘The liquidators pursued claims in England… against former auditors, Price Waterhouse and Ernst & Whinney, alleging negligence, particularly concerning the imprudent business by the BCCI Group and the lending practices of the BCCI Group in relation to certain borrowers,’ a Deloitte statement to the DTI said. The case continues.