On Tuesday the House of Lords heard allegations that Bank of England officials acted recklessly by licensing the collapsed BCCI, having known of its precarious financial position, according to a Financial Times report.
Lord Neill, speaking on behalf of Deloittes, argued Bank officials acted recklessly in continuing to license BCCI, knowing anyone depositing money at the bank was putting their investment at risk.
The charge of misfeasance, on the part of the Bank of England, is a rarely used type of misconduct which could result in damages in excess of £550m being claimed for.The Bank is expected to say a case cannot be brought against it because the liquidator would be unable to demonstrate the knowledge and intentions of Bank officials at the time.
The case should end today, with a judgment given by Easter. If Deloittes succeeds, the main trial is expected to begin in two years’ time – eight years after it first attempted legal proceedings against the bank.
If the Bank wins, it will mean the end of its involvement in BCCI-related litigation going back to 1993.
In May this year, Deloittes paid out Pounds 1bn to creditors in more than 140 countries bringing total repayment to 60% of the $9bn owed, with a worldwide raft of legal judgements set to further boost final payment.
The previous year law lords ruled the Bank of England could not be sued under European law for failing to force closure earlier at the fraud-ridden Bank of Credit and Commerce International.
Accountancy Age reported that this decision had won the Bank of England further advantage in its battle with Deloittes.
In 1991 the Bank of England shut down BCCI after false entries were found on its Pounds 13.6bn balance book. This left more than 70,000 creditors worldwide, many with private accounts, pursuing claims against the BCCI.
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