Bank secretly ordered investigation of Mount

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The Independent Online
THE BANK of England secretly ordered a Section 41 investigation into Mount Banking Corporation under the Banking Act, but it was not completed by the time Mount was closed two weeks ago.

This emerged yesterday at the opening of a High Court attempt by the Shah family, owners of Mount Banking, to fight the closure of their pounds 200m bank by the Bank of England.

New evidence about Mount Banking obtained this week in the Section 41 investigation led to a postponement over the weekend of the family's application to overturn the appointment of provisional liquidators.

Before the closure, the Bank of England asked Michael Hughes, a partner in KPMG Peat Marwick, to carry out the Section 41 investigation, which gives an inspector wide powers to look into the affairs of a bank.

The court was told that Mr Hughes had interviewed Suresh Shah, chairman of Mount, in two sessions totalling six hours over the past week.

Lawyers delivered the new evidence to the shareholders' lawyers just before midnight on Wednesday, and it raised new matters that put the case on 'a very different basis', counsel for the Shah family said. They asked for the hearing to be adjourned until Monday while transcripts of the meetings were studied.

The court was also told that one of the submissions by the Shah family to be heard next week will be that the Bank of England had remedies other than closure for the problems that have come to light.

Affidavits by Mr Hughes and Roger Barnes, head of the Bank of England's supervision department, are before the court.

But a stop order has been put on them so that they will not be available in the normal way for inspection by creditors, unless the court gives leave.

Michael Crystal, counsel for the Bank of England, said he did not consent to, but did not oppose, the order.