In a forceful defence, unprecedented for its clarity, the Bank of England said: 'In view of the extraordinary nature of accusations made against the Bank, the Bank states in unequivocal terms that the allegations that it acted in some way in collusion with various parties, including BCCI, are wholly without foundation.'
Senator John Kerry's report on BCCI, published on Thursday, sharply criticised the Bank of England's handling of the BCCI affair.
The Bank said the Kerry committee did not take evidence from the Bank, have access to Bank documents or check facts with the Bank, yet made allegations against it that had 'no basis in fact'.
In the passionately worded statement, the Bank of England dismissed the Kerry report's assertions about what the Bank knew of BCCI's fraudulent activities, and when, as incorrect. There was 'at no time any agreement' among the Bank, the government of Abu Dhabi (BCCI's majority shareholders), BCCI's auditors, Price Waterhouse, and BCCI to suppress BCCI's crimes, nor did the Bank of England hide behind British secrecy laws.
The Bank said that publication of remedial action for a troubled bank would undermine its object - protecting depositors - since it would cause a run on the bank.
'To suggest that the Bank entered into a conspiracy with, among others, a supervised institution to avoid disclosure of criminality, or that the Bank became, even inadvertently, a party to a cover-up of criminality, is misconceived and offensive,' it said.
Contrary to the statement that the Bank of England found ways to prop BCCI up, the Bank said it at no time entered into any agreement not to close BCCI. Rather, on the information available, it decided that the risks of a radical refinancing and restructuring to keep BCCI in business outweighed the certainty of substantial loss to depositors if BCCI were to close.
In a move that appeared to distance it from Price Waterhouse, the Bank said the Kerry report was wrong in saying that PW would not have certified BCCI's 1989 accounts without assurances by the Bank. PW's decision to certify the accounts was PW's affair, and the Bank did not try to tell PW how to exercise its responsibility, the Bank said. It added that in April 1990 'the Bank did not have the same picture of the fraud as was becoming available to PW'.
The Bank became aware of the full extent of the fraud only in July 1991, when it received new revelations about the affair, and then it moved swiftly to close BCCI. 'There is no basis for any suggestion that the Bank would have 'simply hoped for the best' had it not been for the New York District Attorney's impending indictment.'
The Bank said it would comment on a report by Lord Justice Bingham on the Bank's supervision of BCCI under the Banking Acts. The inquiry had access to Bank papers and witnesses on BCCI, and the report is expected to be published shortly after the opening of Parliament on 19 October.Reuse content