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Last Updated: Sunday, 12 June, 2005, 15:09 GMT 16:09 UK
Witnesses summoned in BCCI trial
Brian Quinn, former head of banking supervision at the Bank of England
Brian Quinn will be the first person to give evidence in the trial
A 1bn legal action against the Bank of England stemming from the BCCI banking scandal enters a new phase on Monday when witnesses are due to be called.

Liquidators for BCCI, which collapsed in 1991, are suing the Bank for damages, claiming it knowingly failed to protect thousands of investors.

About 6,500 people lost savings when BCCI collapsed but the Bank strongly denies that it was wilfully negligent.

The trial began in January 2004 and could last up to three years.

Landmark case

The lawsuit, brought by financial services firm Deloitte, is the first in the Bank of England's 300 year history.

Deloitte claims that the Bank failed to properly regulate the Pakistani-Arab bank prior to its spectacular failure in 1991.

The complexity of the case has been reflected by the fact that opening statements by lawyers for both sides took more than six months.

BCCI TIMELINE
1972: Luxembourg-based BCCI opens branch in London
1985: Price Waterhouse investigates BCCI losses
1987 Luxembourg asks for help to regulate BCCI
1988: Tampa branch of BCCI closed after money-laundering charges
1990: Price Waterhouse says BCCI needs 1.8bn rescue
1991: BCCI closed down by international regulators
1992: Bingham report criticises Bank of England's role
1993: Liquidators issue writ against Bank of England
1997: Labour moves banking supervision to FSA
2004: Court case begins

Brian Quinn, the Bank's head of banking supervision at the time of BCCI's collapse, is due on Monday to become the first witness to take the stand in the trial.

In addition to Mr Quinn - now chairman of Celtic Football Club - lawyers for the Bank have also called Peter Cooke, Mr Quinn's predecessor, who was in charge of regulation in 1979 when BCCI was first given a UK banking licence.

Questioning of the two witnesses is expected to take up to 12 weeks.

Bills mounting

The case is proving extremely expensive for both sides.

According to the Bank's annual report which will be published this week, it has already spent 70m on the case.

Its final legal bill could rise to 100m if, as expected, the case lasts until the end of 2006.

BCCI, which at its peak managed assets of more than $20bn, was shut down after it emerged that it had hidden debts of 7bn and was trading while insolvent.

A 1992 judicial report criticised the Bank of England for not spotting BCCI's criminal behaviour.

However, the report blamed poor communication and procedures rather than deliberate negligence for BCCI's collapse.

Sir Eddie George, Bank of England governor at the time of BCCI's collapse and a number of his predecessors, may also be called as witnesses.


SEE ALSO:
BCCI's big day in court
13 Jan 04 |  Business
Bank told to release BCCI files
02 Mar 04 |  Business
Bank of England accused over BCCI
13 Jan 04 |  Business
Bank faces 1bn law suit
23 Mar 01 |  Business


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