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THE BANK of England yesterday put a brave face on the Bingham report by

accepting its criticisms and recommendations and announcing a new top-level

appointment to investigate fraud.

But Robin Leigh-Pemberton, the Governor, and Eddie George, his deputy, dwelt
mainly on Lord Justice Bingham's conclusions that the 'present system of
supervision has served the community well', that there was no need for a radical
overhaul and that the decision to shut BCCI was justified.

Mr Leigh-Pemberton said: 'It was a good report. It was balanced in judgement and
it made valuable recommendations. But it doesn't say the Bank was wrong in its
handling of BCCI or that the Bank should have closed it down earlier. On the basis
of that I see no need for any resignations.

'It's asking too much of regulators to expect us to keep depositors in a failsafe

position . . . It's our job to reduce this risk to the very minimum.'

The Bank's response paid rather less attention to the stream of detailed criticisms of
its handling of BCCI which are a constant theme of the report and go back as far as

In acknowledgement of its failure to use the instincts of an investigator at crucial

moments, the Bank announced that Ian Watt, a chartered accountant from KPMG
Peat Marwick, is to head a new Special Investigations Unit to pursue fraud and
malpractice in banking.

The report said that the bank's supervision department did not follow up clues to
what was going on at BCCI vigorously enough. Peter Peddie, formerly a partner in
Freshfields, the City solicitors, is to head a new specialised legal unit whose job is
to advise the Bank on how far it can go in wielding its powers.

The report says that in the past there has been too much concentration on what the
Bank cannot do under the Banking Act. Worries about taking action unless the
legal case is cast iron have hampered its effectiveness.
The Bank is also to do more extensive inspections of banks on their own premises.
It is strengthening its systems for internal communication - criticised in the report,
partly because Brian Quinn, the director responsible, was not always kept fully
informed - as well as those for talking to the Treasury.

The Treasury said there would be a series of amendments to the 1987 Banking Act,
most of which have already been canvassed publicly by the Bank, including
powers to refuse or revoke authorisation of banks whose structures cannot be
properly supervised.

Auditors will also be given a duty to pass information on fraud to the Bank of
England. They now have a right to tip off the Bank, but no duty.

Plans for improving international bank supervisory methods, announced in the

summer, are included in the response to the report. This will involve better
exchange of information with overseas regulators and minimum international

There will be measures to improve the effectiveness of the Board of Banking

Supervision, the group of senior figures the report says were let down because they
received inadequate information.

Mr Leigh-Pemberton said: 'I want our supervisors to have the resources, training
and above all the support they need to do this difficult but critical job.'

Price Waterhouse, auditor to BCCI, welcomed the report, saying it revealed for the
first time the part it played in uncovering the fraud and disclosed the full extent of
its communications with the Bank over a long period.

Ian Brindle, senior partner, said: 'The Bingham report is entirely consistent with
the position maintained by Price Waterhouse since July 1991 that as the facts
emerged our role would be vindicated, and that we would be shown to have acted
promptly, properly and professionally.'

Accounting bodies supported in principle the report's recommendations that bank

auditors and reporting accountants should have a legal duty to report to the Bank of
England in certain circumstances.

Sir Nicholas Goodison, president of the British Bankers Association, welcomed the
fact that there was nothing in the report that would justify taking banking
supervision away from the Bank.

A Luxembourg court yesterday cleared the way for a compensation package to be

put to BCCI creditors. The package includes a contribution of dollars 1.2bn to
dollars 2.2bn from Abu Dhabi.