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10 DOWNING STREET LONDON SWIA 2AA
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THE PRIME MINISTER
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11 September 1991
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1. cc Mr Carter, SED Chibs telmo 262 refers)
Mr Store, HKD Mr Holland, WIAD
Thank you for your letter of 11 August.
2. Retrun to me
AKS
17/9
There is no question of the Bank of England being uninterested in any discussions that will secure the best interests of depositors, creditors and staff, in the way you suggest. We would all like to see depositors get as much of their money back from BCCI as possible; indeed, that was why the Bank of England and the other international regulators of BCCI took action on 5 July to secure control of the assets of the bank by putting them under the protection of the courts. I think, however, that the initiative now has to come from the representatives of the main shareholder and the provisional liquidator. I understand that their discussions are continuing.
The Bank will obviously consider any proposals put to them. However, if a total or partial reconstruction of BCCI's UK operations is involved, the Bank of England would need ultimately to decide whether to authorise such a bank under the 1987 Banking Act. The Bank would need to be satisfied that any new or reconstructed bank fully complied with the stringent requirements of the Banking Act, and would continue to do so. These
requirements are not simply financial: they also relate to the fitness and properness of managers and controllers. One might expect the Bank to be particularly cautious in the light of recent experience and it would therefore be unfortunate if either depositors or staff were to be given an unrealistic impression of
12/4.
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