Major’s Image Could Slip Over Big Banking Scandal
The scandal over the collapse of the London-based Bank of Credit and Commerce Internatonal (BCCI) has touched off a political furor here that threatens to tarnish the laurels Prime Minister John Major won at the economic summit.
On Friday, Chancellor of the Exchequer Norman Lamont appeared in Parliament to announce that an independent inquiry will examine the collapse of the controversial bank.
Lamont’s statement was followed by complaints from the opposition Labor Party that the government’s monitoring of the BCCI’s performance was a “sorry and shameful episode.”
Gordon Brown, Labor’s parliamentary spokesman on trade and industry, declared that the government was “slow to act and even slower to come to the aid of small investors, quick to blame others and even quicker in passing the buck among themselves.”
The investigation will center on the Bank of England, which has the responsibility for monitoring financial institutions in Britain, and whose governor, Robin Leigh-Pemberton, said Thursday that an inquiry would be “unhelpful.”
But Leigh-Pemberton changed course Friday, declaring that “the growing level of public interest in this matter can be adequately addressed only through an independent inquiry.”
In speaking of the BCCI’s failure, Lamont told Parliament that there is evidence of “massive and widespread” fraud on the part of bank authorities.
While the BCCI technically was chartered in Luxembourg, its worldwide operations were effectively directed from London, according to banking sources.
The government has been accused of failing to act on charges of corruption within the bank made more than a year ago, when Major was chancellor of the exchequer under Prime Minister Margaret Thatcher.
Treasury officials confirmed that they had received a letter from Tony Benn, a Labor member of Parliament, in June, 1990, about the bank’s “dubious activities.”
Benn had forwarded a letter from a senior bank employee asking regulatory authorities to mount an investigation to “prevent the catastrophe which will otherwise befall the shareholders, investors and employees of this organization.”
“The apparent incompetence of the bank’s executives and higher management is surpassed only by the widespread corruption and nepotism within its organization,” Benn added.
Officials since have maintained that Benn’s letter got lost in the shuffle and was never seen by senior ministers.
Since Major was then in charge of the Treasury, he can expect to undergo heated criticism, political sources said, over the failure of the BCCI--which left 120,000 British depositors without their money.
