Banks face 80m pounds BCCI payout bill

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The Independent Online
BRITISH banks were presented with an pounds 80m bill yesterday by the Deposit Protection Board to pay for massive payouts to creditors of the failed Bank of Credit and Commerce International.

The levy, contained in a letter sent yesterday to 489 banks operating in the UK, is meant to cover pounds 58m already paid out by the board to BCCI creditors. Regulators closed BCCI last year following the discovery of massive long-term fraud.

The latest payment had been expected by the banks, who provided for it in their interim results in the summer.

Worst-hit are the big four clearing banks. National Westminster and Barclays will each have to pay an estimated pounds 13m- pounds 14m each within 21 days.

One clearing bank spokesman who wished to remain nameless complained yesterday: 'Why should the banks pay for the mistakes of the regulators?'

And the Labour MP Keith Vaz queried whether the pounds 80m really was needed to cover BCCI payments, or whether the Deposit Protection Board, whose chairman is the Governor of the Bank of England, was merely using the opportunity to replenish the fund after a hard year.

Mr Vaz said that only 15,000 of 40,000 claim forms sent out to BCCI creditors by the board in July last year had been returned. 'There was massive under-claiming. So why is the board levying such a huge amount?'

The Deposit Protection Board pays out 75 per cent of the amount creditors lose in bank failures, up to a limit of pounds 15,000. It said yesterday that it had run up a deficit of pounds 28.9m at the last balance sheet date in February.

This deficit had been covered by a pounds 125m borrowing facility at the Bank of England. Since then, it had to make further payments to creditors of two other failed banks as well as BCCI.