Liquidation of BCCI Sought in Britain

British banking officials Monday sought to have the scandal-plagued Bank of Credit & Commerce International liquidated to repay thousands of depositors victimized by its shutdown.

Lawyers for the Bank of England said BCCI, which was closed this month amid allegations of pervasive fraud, is technically insolvent and should be shut permanently in the public interest.

Britain’s High Court delayed any decision for at least eight days, far less than the 30 days requested by lawyers for big depositors who hope that the Abu Dhabi-controlled bank can be rescued.

BCCI, which operates in 69 countries, was shut down July 5 by central banking authorities in several countries who charged that the bank had engaged in systematic, widespread fraud for years.

A report by auditors Price Waterhouse, part of which was read in the packed High Court hearing, said the group used fraud on “an ever-increasing scale” to cover up losses.

Bank of England counsel Gabriel Moss said BCCI might never have made a profit and said its management had been “fraudulent and dishonest.”

But Judge Sir Nicolas Browne-Wilkinson held out the possibility of a rescue, drawing loud applause from BCCI employees who hope to save their jobs.

More than 48,000 depositors have 652 million pounds ($1.1 billion) of savings locked up in BCCI. The bank has $3.2 billion of its assets in Britain out of a total of $20 billion worldwide.

In the event the bank is closed forever, big depositors would get little relief from the British central bank protection plan, which pays back only 75% of savings with a maximum payout of 15,000 pounds ($25,000).

Lawyers for the Abu Dhabi authorities, who own 77% of BCCI, said that it could take up to six months for a rescue package to be put into place and that it would take a month to determine whether a rescue was feasible.

In court, Browne-Wilkinson agreed that the rescue plan had been well along at the time of the seizure. But he said any rescue must ensure that BCCI “becomes financially viable and its management beyond reproach.”