MPs angered by Bank's BCCI report

Click to follow
The Independent Online
THE Bank of England was moving into political trouble last night over the collapse of Bank of Credit & Commerce International when Terence Higgins, the influentual Conservative MP, attacked its response to parliamentary criticisms as inadequate.

The Bank's document proposed new machinery to coordinate investigations of complex fraud, and more responsibility for auditors to report suspected fraud.

It asked the Government for powers to close down or refuse to authorise banks and bank branches whose corporate structure is suspect, and backed a reform of the international payments system to make it easier to trace the proceeds of fraud and drugs.

But the proposals were overshadowed in the Commons when Robin Leigh-Pemberton, Governor of the Bank, was rebuked by Betty Boothroyd, the Speaker, after angry protests over leaks of the Bank's response, described by Labour MPs as a 'pre-emptive strike.'

The latest controversy comes as a report on the BCCI affair by Lord Justice Bingham nears completion. It is widely expected to criticise the Bank's role.

Keith Vaz, the Labour MP who is campaigning on behalf of some of the victims of the BCCI collapse, accused the Bank of 'running around the City like a headless chicken to defuse the expected criticism by the Bingham report.'

The Speaker said: 'I strongly deprecate the action because it shows great discourtesy to the House.'

Several newspapers, including the Independent, yesterday previewed the Bank's response after it had emerged in the Commons on Tuesday that it was about to be published. The Bank said: 'We did not ourselves alert the press ahead of today to the fact that the report was going to be released today.'

After further complaints from MPs that the Bank had released its reply during the morning before formally lodging it in the Commons, a spokesman said the Bank had taken advice and any breach of privilege was 'inadvertent.'

However, the critical response from Mr Higgins, former chairman of the influential cross-party committee on Treasury affairs that prepared the report on BCCI, is much more serious for the Bank. It suggests the Bank will have an uphill struggle winning Westminster over after the Bingham report is out.

Mr Higgins welcomed some of the Bank's forward-looking recommendations, including a tightening up of international bank supervision. But other responses, such as the reply to MPs' views that the Banking Act should be interpreted more strictly, were 'less tough than we suggested'. He called on the Bank to issue a further report answering the committee's criticisms.

The Bank retorted that its response was 'deliberately incomplete, leaving the backward looking material until after the publication of the Bingham report'.

Meanwhile, the accountancy profession showed a relaxed attitude to a proposal by the Bank that auditors should have a duty, rather than just a right, to report suspicions of fraud to banking supervisors.

The right of auditors to report fraud, which came in with the 1987 Banking Act, led to widespread controversy at the time because of the risks of breaching client confidentiality.

However, there were few objections yesterday to the proposal to tighten the wording of the Act 'so that there can be no doubt as to an auditor's duty to report' fraud.

Henry Gold, technical director of the Institute of Chartered Accountants in England and Wales, said the combination of the Act and the profession's own guidance on auditing banks already created an obligation for auditors to override the duty of confidentiality to their clients.

Commentary, page 27

Comments