A senior official at the Bank of England was likened to Neville Chamberlain attempting to appease Adolf Hitler in his failure to prevent BCCI becoming one of Britain's fastest-growing banks in the 1980s, the High Court heard yesterday.
Peter Cooke, the former head of banking supervision at the Bank, chose to rely on regulators in Luxembourg for an assurance that BCCI was sound, even though he knew that the country's authorities were not able to police the group effectively, according to Gordon Pollock QC, acting for BCCI's liquidator, which is suing the Bank.
"One has the impression perhaps of Mr Cooke coming back from Luxembourg and descending the stairs of the aeroplane, wearing his bowler hat, carrying his umbrella and waving a piece of paper saying 'no responsibility in our time'," Mr Pollock said.
Deloitte & Touche, BCCI's liquidator, is suing the Bank for £1bn on the grounds that its officials failed to perform their public duty in regulating BCCI properly. The group collapsed in 1991, becoming the biggest failure in the sector ever, owing £5bn to 70,000 creditors.
The high-profile case, which could take 18 months to hear, has already led to a string of embarrassing revelations about the Bank's inner workings and its attitudes towards fellow financial regulators around the world.
It emerged earlier in the trial that one official referred in an internal document in the 1970s to counterparts at the authorities of other countries as "wogs".
Mr Pollock yesterday highlighted documents which revealed that despite the fact that the Bank relied on Luxembourg's view of BCCI, its employees privately did not hold the Continental watchdog in high esteem.
One official of the Bank observed in 1984 that the Luxembourg body, where BCCI was incorporated, provided "poor supervision".
In another embarrassing revelation, one official dubbed the French chairman of a company owned by BCCI to be "very arrogant". However, the same official said the new Pakistani management of the company was "all bright and intelligent".
A key plank in the liquidator's argument is that the Bank, which had responsibility for regulating the financial sector in the 1980s, knew BCCI was really based in the UK, making it the responsibility of the UK supervisor.
The Bank is denying the charge. It says that despite BCCI's effective nerve-centre being in the UK, where it did much of its business, it believed regulations at the time pointed to BCCI being the responsibility of Luxembourg, because it was incorporated there.Reuse content