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support, remaired in place. The shareholders would no doubt have made the point that I had acted without consulting them in advance to find out what their position was. Further it could have been said that, given the other considerations to which I have referred in paragraph 14 in favour of keeping the doors open, I had acted unreasonably. It could have been argued that this was a bank which the latest accounts showed to be solvent and which was meeting the capital and liquidity requirements laid down in the Banking Ordinance. Had I been ordered to re-open the bank, this would have left the bank in an extremely vulnerable position.
In my view there would have been a run on the bank upon the doors re-opening as confidence in the bank would have been destroyed by its earlier closure.
20. In the light of these considerations, and given my assessment that the bank was "sound and viable", I decided to allow the bank to open on Saturday. A press release to that effect was issued on Friday, 5 July. copy of that press release is at Enclosure II.
21. This decision wis supported by the general manager of
the bank and its aud:.tors with whom I discussed the situation late on Friday evening. I felt it important, however, that the bank should only open in a controlled manner and thus I required the bank to take certain defensive measures which were designed to limit any loss of liquidity which might occur. This is a standard superv..sory procedure to deal with a situation where a bank itself may be "sound and viable" but where in external event (ir. this case a crisis in another part of the Group) may cause a loss of confidence in the bank. Thus, I issued instructions to the bank not to allow deposits to be repaid before their due maturity date and not to increase the overall size of The loan book beyond its current level. These were precautions that the bank's management would have introduced of its own accord. I also ordered the bank not to pledge any of its assets without my consent and not to increase its financial exposure to the rest of the BCC Group. A copy of my letter dated 6 July 1991
s at Enclosure III.
22. must emphasise that at no time on 5 or 6 July did I
nstruct the bark, either in writing or verbally, to refuse on Saturday, 6 July to pay cheques drawn on its customers which had gone through the previous night's clearing. Nor is there any substance in allegations that the bank was instructed to pay all cheques payable to the Government but to return other cheques. The
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