As Safe as the Bank of England?

DOIhttps://doi.org/10.1108/eb025621
Publication Date01 Mar 1993
Pages203-210
AuthorKenneth Mullan
SubjectAccounting & finance
As Safe as the Bank of England?
Kenneth Mullan
Kenneth Mullan
is a Lecturer in Law at the University of
Ulster
ABSTRACT
This paper seeks to analyse the legal
implications of the recent decision by the
liquidators of the Bank of Commerce and
Credit International (BCCI), Touche Ross, to
issue writs against the Bank of England
claiming damages on behalf of a small, rep-
resentative number of depositors. The writ
alleges a failure to regulate BCCI properly in
accordance with the banking legislation.
The author examines the Bank of England's
duties and functions under the banking
legislation,
reviews the case-law which has
examined the statutory powers of regulatory
authorities in the financial field and
assesses how successful the proposed
action is likely to be.
The action against the Bank of England is
the latest in a range of options, designed to
retrieve the significant losses suffered by
the depositors in
BCCI,
which have been
mooted since the bank collapsed.
INTRODUCTION
The much publicised collapse of the
Bank of Credit and Commerce Inter-
national (BCCI) appears set to have
serious consequences for a number of
key parties at a variety of
levels.
In addi-
tion to the fraud, corruption and busi-
ness crime aspects of the affair, it is also
clear that a large number of individuals
arc facing significant losses of revenue as
a result of the decision of the Bank of
England to close down the operations of
the bank.
Since the implementation of that
decision, the Bank of England has been
the subject of the most vociferous of
attacks. Central among the many criti-
cisms has been the complaint that it
should have intervened earlier to safe-
guard the interests of the depositors.
Evidence has been presented which sug-
gests that reports had been forwarded to
the Treasury and to the Bank of England
prior to the closure of the Bank which
indicated that there was fraud and cor-
ruption in BCCI. It has also been sug-
gested that the Bank missed numerous
opportunities to investigate BCCI.
The argument therefore remains that
if the Bank of England had indicated at
an early stage that money ought to be
withdrawn from BCCI or had in fact
closed down BCCI prior to July 1991,
then losses might not have been so high.
The culmination of the variety of
claims and counter-claims has been a
decision by the liquidators of BCCI,
Touche Ross, to issue a writ against the
Bank of England, claiming damages on
behalf of a small, representative number
of depositors. The writ alleges a failure
to regulate BCCI properly in accordance
203

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