Bank accused of dishonesty in £1bn suit

A NEARLY one-billion-pound (€1.45bn) lawsuit against the Bank of England over its role in the world’s biggest banking fraud 13 years ago kicked-off yesterday with sharp criticism of the 300-year-old central bank.

In a hearing set to last well over a year at a cost of £100 million (€145m), lawyers for the liquidator of Bank of Credit and Commerce International are seeking to prove that the BoE knowingly did not protect depositors of the bank when it spectacularly collapsed in 1991 owing $10 billion (€7.85bn).

“The action is being brought against what was once, I emphasise once, one of the most revered and respected institutions of this country,” said Gordon Pollock, a barrister for liquidator Deloitte.

The juryless trial, the first ever brought against the bank, is set to last at least a year and will see former governors Eddie George, Robin Leigh-Pemberton and Gordon Richardson take the stand.

The Bank of England will call the men who ran the bank from 1973 to 1993 to challenge Deloitte’s claim that officials at the bank’s supervisory division kept information from them.

As the Bank of England is legally protected from negligence claims, the liquidator is pursuing the stronger claim of misfeasance, acting dishonestly or in bad faith.

The case, in which compensation is being sought for the failed bank’s creditors, will reveal sensitive internal Bank of England correspondence about BCCI.

A source familiar with the matter said last week the bank would not settle out of court as this would encourage future claimants to try to get around the statutory protection from negligence claims.

BCCI was closed in 1991 by regulators in a worldwide swoop, partly organised by the Bank of England, after it discovered the lender had disguised losses and was insolvent.

BCCI’s headquarters were in London, but it was registered in Luxembourg, where regulation was less rigorous.

The Bank of England gave BCCI a licence in 1980 and discussed the bank’s status on and off until its collapse, documents cited in Deloitte’s claim show.

Reuters