BCCI regulation 'left to Luxembourg'

SENIOR officials at the Bank of England knew it was wrong to rely on the under-resourced Luxembourg authorities to regulate BCCI in the run up to its £10bn collapse in 1991, the High Court heard today.

Gordon Pollock QC, acting for liquidators Deloitte & Touche said it was inconceivable that the Bank thought that just because the company was incorporated in Luxembourg it should be licensed and regulated there.

The allegations came on the second day of a trial that has taken more than 10 years to come to court. Pollock said: 'It seems to be accepted on all sides that adequate and reliable supervision requires that the supervisor be located in the place where the main office, in the sense of central management, is to be found.

'Suggesting that if you have a brass plate incorporation in the Cayman Islands that the main supervision should be in the Caymans is absurd. If you get the main office in a European city then that is where you want the supervision to be.' The court has heard how BCCI's centre of operations was in London.

Senior executives at the Bank, being sued for the first time in its 300-year history for misfeasanceallegedly turned a blind eye to the activitiesof BCCI and were well aware of the doubts around the corporation's founder Agha Abedi.

Pollock described the attitude of those responsible at the Bank of England for the regulation of BCCI's activities as 'spineless, weak and self interested'. He said that once they realised that BCCI was in trouble, officials at the Bank ran away from their responsibilities.

Deloitte is suing the Bank of England for £1bn on behalf of 80,000 depositors who lost out when BCCI collapsed in 1991 amid allegations of fraud and corruption.