BCCI Claims Dubbed 'Hopelessly Misconceived' By Bank of England

by Robin Pilgrim, LawAndTax-News.com, London

23 July 2004

Speaking in the UK High Court in response to allegations that 22 Bank of England officials shirked their responsibilities over the regulation of the Bank of Credit and Commerce International, which collapsed in 1991, the Bank's Counsel, Nicholas Stadlen QC condemned the BCCI liquidator's case as "hopelessly misconceived".

Deloitte and Touche launched the lawsuit against the central bank, which was the UK's financial regulator at the time, in an attempt to secure some form of compensation for BCCI's 6,000 British depositors. The liquidator claims that the Bank of England consistently ignored wrongdoing at BCCI, contributing to the US$10 billion in debt that it left when it collapsed.

One of the main charges levelled by Deloitte is the fact that the Bank of England knew that BCCI's main place of business was London (despite being registered in Luxembourg), and that armed with that knowledge, the central bank should have been more vigilant in its regulation of BCCI.

The Bank of England has never been successfully sued, and Deloitte and Touche's campaign for justice is likely to be complicated by the fact that the former financial regulator is immune to all negligence claims. Therefore, the liquidator must prove that the central bank knew that it was acting illegally.

Speaking following the presentation of the case for the prosecution, which took place over a six month period, Mr Stadlen suggested that given that no cases of misfeasance had occurred at the Bank of England over the past few hundred years, to suggest that 22 such instances had taken place in recent history was "rather like a number 31 bus - you wait for 300 years for one to come along, and then there are 22 of them all at once".

He went on to argue that the liquidator had cherry-picked information in order to present a misleading impression of the Bank's supervision of BCCI, and explained that under European banking agreements, there was no reason for the central bank to have supposed that BCCI's primary regulator should not have been the Luxembourg authorities.

Mr Stadlen also observed that even if the Bank of England had had concerns over the solvency of BCCI, it did not have the power to threaten to revoke its UK licence.

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