BCCI returns to haunt Bank of England

[RainDog]

http://www.guardian.co.uk/business/story/0,3604,1115267,00.html

BCCI returns to haunt Bank of England

A court case looking at events in the 1980s could set a precedent for suing regulators

Simon Bowers
Saturday January 3, 2004
The Guardian

...The central allegation facing the Bank (of England) is that it deliberately perpetuated the charade of BCCI as an overseas bank, allowing it to operate outside Bank of England full regulatory control throughout the 1980s.

...As early as February 1979 Frank Hall, a senior lawyer at the Bank, wrote an internal memo to colleagues concerning the imminent Banking Act. In it he said: "I should be grateful if you could let me know whether ... there are any companies which are not registered in the UK but which have their principal place of business or place of central management or control here ... but which we should not want to recognise."

Copies of the memo, which was circulated among senior department officials, show several hand-written annotations. "I can't think of any, can you?" says one, to which another official replies: "No."

A string of other internal memos make clear the Bank's state of panic. In 1982 BCCI was described as "on its way to becoming the financial equivalent of the SS Titanic!".

The following year yet another Bank analyst wrote a report on BCCI entitled "Why action is now urgently required". It suggested the Bank was left with "two basic choices": to close BCCI down or to insist it be redesignated a UK bank, under full Bank of England supervision.