Price Waterhouse (now part of PricewaterhouseCoopers) and Ernst & Whinney (now Ernst & Young) faced ruin if they had been forced to pay the original amount claimed by liquidator Deloitte & Touche. The case threatened to destabilise the entire global accountancy sector.
However, yesterday's deal means that BCCI's 30,000 creditors worldwide will get a further payout. They have already received two "dividends" worth 46 per cent of what they are owed, or about $4bn, from the liquidators.
In a move initiated by the Bank of England, banking regulators around the world shut down BCCI in 1991 after discovering massive long-term fraud. Once BCCI's offices in more than 60 countries had been closed, the liquidators discovered losses of $10bn, affecting around 100,000 customers.
Three sets of liquidators were appointed, one for each country where BCCI was registered - the UK, Luxembourg and the Cayman Islands. Yesterday's settlement was led by Baden & Baden, a Luxembourg-based law firm and the "global" liquidator. The UK's liquidator, Deloitte & Touche, was also represented.
Ian Brindle, senior partner of the former Price Waterhouse, said: "We would have liked to fight this to the bitter end, to vindicate ourselves in court. But we are advised that it could easily be another 10 years before the case comes to trial, and it is simply too costly and distracting in terms of management time to continue with this."
Nick Land, chairman of Ernst & Young, said: "We will be pleased to bury this matter once and for all and stop spending vast sums of money defending Ernst & Whinney against a claim that we have no doubt would have failed had it gone all the way to trial."
Under the deal the liquidators are also withdrawing lawsuits against the Luxembourg Central Bank and the State of Luxembourg in return for unspecified cash payments.
The majority shareholder, the State of Abu Dhabi (which owned 77 per cent of BCCI), also made a $70m payment into yesterday's settlement. Abu Dhabi had already made a $1.86bn payment to creditors four years ago under a previous deal.
The British liquidator, Deloitte & Touche, is still suing the Bank of England for pounds 550m. It launched a claim in May 1993 claiming that the Bank "knowingly breached its statutory duties in relation to the regulation and supervision of BCCI". The bank made huge false loans and had a "culture of corruption", one regulator's report said.