Lords back Bank

The protracted dispute between the liquidators of the failed Bank of Credit and Commerce International and the Bank of England may finally be reaching a denouement after the House of Lords determined that the Bank could not be sued under European law for not insisting on an early closure of the bank. BCCI had its banking license revoked in 1991 after disclosure of major fraud by its senior management. The liquidators hope to overcome the Bank of England’s statutory immunity from litigation in order to recover UK£500 million for British depositors with BCCI. They maintain that the Bank did not intervene early enough, a view supported by an investigation into the collapse headed by Lord Justice Bingham in 1992. However, the five law lords rejected the liquidators’ contention that the Bank had not complied with a 1977 European banking directive which provides for effective supervision of banks by regulators and refused leave to take the matter to the European Court. They found that while member states are under an obligation to regulate their banking sectors, the directive did not enable depositors to raise damages claims.