Bank 'warned over BCCI in 1977'

THE Bank of England was warned by Luxembourg regulators as far back as 1977 about major problems with auditing the collapsed Bank of Credit and Commerce International, a court heard today.

BCCI collapsed with debts of £10bn in 1991 in the biggest-ever banking scandal. But central bank regulators in Luxembourg, where BCCI was incorporated, told Bank of England officials 14 years earlier that they were unable to audit six of the bank's branches in England. The regulators told Bank of England officials: 'We cannot cope.'

In the High Court, Gordon Pollock QC, for liquidator Deloitte & Touche, told Mr Justice Tomlinson this was because facts were being concealed by BCCI. Then Bank of England Governor Sir Gordon Richardson wrote on a memo about BCCI: 'They are not under effective review.'

Deloitte & Touche is suing the Bank of England for up to £850m, claiming that it ignored its responsibility to depositors in BCCI by failing to regulate it.

The court was also shown internal memos from senior Bank of England officials that said: 'Banks of doubtful standing have been able to branch out into the UK and seek to trade under pretentious titles.' Pollock claimed that was a reference to BCCI.

The hearing continues.