BCCI liquidators lose pounds 550m claim on Bank of England

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The Independent Online
The High Court has thrown out claims totalling pounds 550m by the liquidators of the collapsed Bank of Credit and Commerce International (BCCI) against the Bank of England, in a judgment that has taken both sides by surprise.

Deloitte & Touche, the liquidators of BCCI, said they were disappointed and would launch an appeal. The Bank said it was delighted.

The liquidators launched their action against the Bank four years ago over its role as one of three central banks that licensed BCCI. BCCI was shut down by global regulators including the Bank when gigantic long-term frauds totalling $10bn (pounds 6bn) were uncovered.

The nub of the liquidators' case was that the Bank of England knew about the frauds inside BCCI long before it acted to shut it down, thus making the Bank liable for damages, which would in turn recompense creditors.

Mr Justice Clark said yesterday: "The plaintiffs have no arguable case that that Bank dishonestly granted the licence to BCCI or dishonestly failed to revoke the licence or authorisation in circumstances when it knew, believed or suspected that BCCI would probably collapse."

The Bank's then Governor, Sir Robin Leigh-Pemberton, came in for severe criticism from MPs when the full extent of BCCI's losses came to light in 1992-3. The collapse left more than 100,000 creditors world-wide nursing losses, including thousands in the UK. More than 6,000 depositors in the UK backed the liquidators in their claim against the Bank.

The Government commissioned a report under Lord Justice Bingham to apportion blame for the collapse. It was critical of the Bank.

However, with regard to the liquidators' claim against the Bank, Mr Justice Clark said yesterday: "There is nothing in the Bingham Report or in the documents which I have seen to support such a conclusion and there is much to contradict it."

Sources close to Deloitte & Touche said the liquidators were bitterly disappointed and not a little surprised by the judgment, but added that "it's not over yet." Deloitte issued a statement saying it was disappointed but "it has always been recognised that the merits of the case would have to be reviewed in the Court of Appeal."

This blow comes a week after the Deloitte liquidators had pounds 1m slashed from their fees by a Luxembourg judge. The liquidation has already gone on for four years and looks set to stretch well past the turn of the millennium. Last December the liquidators paid creditors a first dividend of 24.5p in the pound and expect to pay about another10p in October.

The Bank said the High Court judgment had confirmed "that there never was any factual basis to support the allegation that it had acted dishonestly or in bad faith".

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