§ 2.52 p.m.
§ Lord Spens asked Her Majesty's Government:
§ Whether, in the light of the publication of the liquidator's accounts, they have considered requiring the Bank of England, as the responsible supervising and regulating authority, to compensate depositors and creditors of the Bank of Credit and Commerce International.
The Earl of CaithnessMy Lords, the Government sympathise with those who lost money in the collapse of BCCI. But, having considered the matter carefully, they do not believe that it would be right to offer compensation over and above that provided for under the statutory deposit protection scheme.
§ Lord SpensMy Lords, I thank the noble Earl for that reply. Does he agree that on 19th July 1991 in another place the Chancellor of the Exchequer said that he would reconsider the implications for compensation if it had been found that the Bank of England had not discharged its role and duty properly and competently? Would not he agree that in any circumstances what has happened since—the Lord Justice Bingham Report, the report of the Treasury Select Committee and now the liquidator's report—indicates that that duty had not been carried out? Therefore there is an obligation to compensate depositors along the lines that depositors of Barlow Clowes were compensated for massive fraud. Is my noble friend not worried that the two-tier system of banking now having been established by the Bank of England, in that there are banks whose depositors are protected and others where they are not, will create problems for the future unless compensation is properly delivered?
The Earl of CaithnessMy Lords, I agree with the noble Lord, Lord Spens, in that the Bingham Report made serious criticisms of the Bank. Where I differ with him is in the interpretation and consequence of that. As he will know from the report, it stops well short of suggesting that things would necessarily have been different if the Bank had acted differently. It does not make any accusations of negligence.
§ Lord RichardMy Lords, I congratulate the noble Earl on the skill with which he skipped from piracy in the Far East to piracy in the City of London. He will know that the liquidator's report says that the bank's losses of 14 billion dollars were caused by,
bad banking, pure and simple".1279 In those circumstances, how can the Bank of England not accept some degree of responsibility for failing to notice and take action on those practices?
The Earl of CaithnessMy Lords, the noble Lord the Leader of the Opposition will have read the Bingham Report with care. He will be aware that the report says that the blame for the frauds lies with those who committed them. As I said, my right honourable friend the Chancellor of the Exchequer considered the matter most carefully and felt that it would be right not to offer compensation.
§ Lord RichardMy Lords, I am not talking of the Bingham Report; I am talking about the liquidator's report. As the noble Earl will be aware, it is a powerful indictment of the behaviour of BCCI and the Bank of England. How can they not take some responsibility?
The Earl of CaithnessMy Lords, the matter has been carefully considered. However, in regard to the Question on the Order Paper, it was the Bingham Report that supported the Government's view on the matter.
§ Lord EatwellMy Lords, given that the date on which the Bank of England knew what was happening at BCCI is fundamental to the Question, can the Minister say when the Bank of England first advised the central bank of another country that BCCI was likely to be uncreditworthy?
The Earl of CaithnessMy Lords, I cannot answer that question because it is not relevant to the Question on the Order Paper.