Documents from the Bank were found in gardens more than three kilometres away.

Eyewitnesses said the windows of the building came out ''like a pack of cards'' and damage was extensive.

One insurance assessor said the damage to the area could be more than GBP1 billion (HK$12 billion), making it the most costly bomb in Britain.

Police spokesman Ms Mandy Hedley said ''a large amount of explosive'' was packed into a refuse-collection vehicle outside the Bank building at 99 Bishopsgate, next to the NatWest Tower.

Ms Hedley said buildings were being evacuated at the time of the explosion following coded warnings. IRA guerillas often give a warning before an attack.

The blast occurred at 5.25 pm (Hongkong time) and shattered the facade of the building.

Bank security guard Mr Raymond Fayres was knocked unconscious when a wall and part of the ceiling collapsed.

''We were all sheltering in the basement and we thought it was just another hoax, when suddenly there was a massive explosion,'' said one Bank employee.

Another member of staff told how a group of employees emerged from the basement and went upstairs to find a security guard in the building ''covered from top to bottom in blood''.

''Bank security alerted police when they noticed a suspicious vehicle along and slightly up the road from our bank, but obviously still within eyesight,'' said Mr John Breen, managing director of Wayfoong Property Ltd, the Bank's property division.

''The people that were in the building were evacuated to the basement area . . . and about half an hour later the bomb exploded.

''It blew out glass windows on all four sides of the building and smoke vents were blown out.

''The police have cordoned off the area and as I understand it we will not be allowed to get to the building for 24 hours.

''It is impossible to guess the cost of the damage to the building. We will hold a meeting as soon as possible once we can get everybody together and once we are allowed by police to get to the building.'' Bank chairman Sir William Purves last night described the bombing as ''senseless''.

Speaking from his home on the Peak, he said: ''Fortunately it was a Saturday and the bank was closed for normal business so only a few staff, security officers and perhaps some maintenance staff, will have been there.'' Liverpool Street mainline railway station was initially sealed off following the warnings and later the entire City financial district was cordoned off by police, causing traffic chaos.

Hospitals said at least 34 people were injured, mostly by shrapnel and falling glass.

One person was admitted to hospital with a collapsed lung and another had to have two fingers amputated.

''The searchers are going through all the buildings and it is going to take an awful long time because the buildings are not safe,'' the spokesman said.

Mr Stephen Miles, a consultant at St Bartholomew's Hospital, said most of the victims' injuries were relatively minor, but five people did have more serious wounds.

''We understand from the scene that there are a number of people trapped in buildings so we are expecting more,'' Mr Miles said. ''Most of the casualties were in buildings which were damaged by the blast.'' About 20 ambulances, two rapid response vehicles, a jeep and two motorcycles were used by ambulance staff to ferry the injured to the hospital and to move doctors to and from the scene.

''A massive cloud of brown smoke came up and everybody just ran for their lives,'' said Mr Nicholas Waddick, a British Rail worker. ''My staff were crying and screaming.'' A young man sat trembling with his head in his hands on a traffic island. Witnesses said he had been blown backwards by the blast, but he would not talk to reporters.

Hundreds of frightened people ran from the scene, through narrow streets covered with glass.

''I saw a lot of people with bad injuries - one with blood coming out of his stomach,'' said Mr Anthony Rotheram, who was released from a hospital after suffering minor injuries.

Spokesman Mr Mark Webb at St Bartholomew's Hospital, where most of the wounded were being taken, said 24 people, 19 men and five women, had been admitted so far.

Police spokesman Mr John White said: ''I have little doubt that the IRA is responsible for this explosion.'' He called the massive blast a ''heinous attack on innocent people''.

In the confusion following the bombing, a second, smaller explosion was reported at a nearby underground railway station. Despite being confirmed at one point by a London underground official, this was later discovered to have been a hoax.

Police also sealed off busy shopping streets around London's landmark department store Harrods, where an IRA bomb in January injured four people and another in 1983 killed six.

The bombing comes one year after a similar IRA blast in the financial district which killed three people and wounded 80.

Last April's bomb at the City's Baltic Exchange building, one day after Britain's general election, caused hundreds of millions of dollars worth of damage. The Baltic Exchange reopened earlier this month.

Yesterday's blast was a setback for Britain's anti-terrorist police. Security had been tightened since the Baltic Exchange blast, with armed police staging spot checks on cars.

The explosion yesterday appeared to mark a return by the IRA to a previous tactic of hitting major economic targets after two blasts last month in the northern English city of Warrington killed two young boys and provoked public outrage.

Sir William said he did not believe the Bank had been targeted. ''We use probably less than a quarter of the building,'' he said. ''It has many other tenants. I don't think we have been pinpointed. We don't have a terribly visible presence.'' He said renovations following last April's blast had been just coming to an end and described the bombing as ''all quite senseless, and it's been going on for far too long''.

''It is very unfortunate but these things happen in London these days,'' Sir William said, adding he hoped it would be business as usual tomorrow.

''I am sure that if the building is structurally damaged, staff will be able to re-assemble somewhere else on Monday.

''Whether we can continue as usual will depend on whether they can get the records and whether the computer system was damaged.

''While the bank is our main branch, our main operations and treasury section in the UK are not in that building.'' He said last year when the building suffered bomb damage the first time, business was not disrupted. ''Staff just came in over the weekend, cleared up the glass, boarded up the windows and carried on, even though I think there was no electricity for a day. People in London rally round and help each other.''