An employee at the Bank of England referred to officials at central banks in other parts of the world as "wogs" who might not understand a basic request for information by the City's most famous institution.
The comment was revealed yesterday in the high profile trial of the Bank's role in monitoring BCCI, which collapsed in 1991 owing £5bn to 80,000 depositors.
The Bank is already fighting to defend its reputation against allegations it acted improperly in the way it dealt with BCCI, and the revelation of the attitude of at least some of its officials towards their foreign counterparts will be a huge embarrassment.
An unnamed official at the Bank made the comment in a private amendment to a draft of a letter sent in 1978 to financial regulators around the world asking if they could assure the Bank that companies which operated in both jurisdictions were "in good standing". The official penned in the margin an amendment to the phrase, saying: "In good standing is a bit of Bankese which might puzzle the odd wog."
In a trial set to take a year and a half and to rack up £50m in legal costs, the Bank is fighting allegations it flouted its public duty by not supervising BCCI, set up by the Pakistani financier Agha Hasan Abedi, more carefully. Deloitte & Touche, the liquidator of BCCI, has brought the case against the Bank in the hope of winning £1bn in compensation for its remaining creditors.
Yesterday Gordon Pollock, one of Britain's highest paid QCs who is acting for the liquidators, also accused officials at the Bank of lying to Lord Bingham, now Britain's most senior law lord. Lord Bingham carried out an inquiry in 1992 into the collapse of BCCI - the biggest failure ever in the banking sector - and concluded that regulation of the international group had been bungled but that the Bank was not legally liable.
A key argument used by Bank officials who gave evidence to Lord Bingham was that they had interpreted Britain's 1979 Banking Act to mean BCCI's principal place of business was in Luxembourg, making the company the responsibility of that country's regulatory authorities. Mr Pollock alleged that in fact the Bank was well aware that "principal place of business" could have meant the UK, where BCCI had extensive operations. The officials were "simply lying" to Lord Bingham, he said.