From
Ref.
Tel. No.
Dole
Commissioner of Bank.ng
CB/BK/049
867 2661
MEMO
Enclosure IA
19
Financial Secretary
To.
via SMA
Your Ref
In
5 July 1991
dated
1.
Bank of Credit and Commerce Hong Kong Limited
I mentioned to you on Wednesday, 3 July the problems which had arisen in the BCCI group and the possible impact which these might have on the operations of BCC in Hong Kong.
2.
The BCCI group has two authorised institutions in Hong Kong, both of which are incorporated here. The main presence, and the one which gives rise to our supervisory concern, is Bank of Credit and Commerce Hong Kong Limited (BCCHK). It is a licensed bank with some $11bn of customer deposits and has a small dtc subsidiary, BCCI Finance International Limited (BCCIF). BCCHк is a direct subsidiary of the Luxembourg holding company.
3.
We presently have a team of examiners in BCCHK looking at its loin book. Large provisions were made in the 1990 accounts in agreement with the auditors, Price Waterhouse, and we have no grounds, at present, for believing that these are insufficient. As of now, we believe that we are dealing with a solvent and viable bank. This was confirmed to me by the auditors at a meeting yesterday.
It cannot be ruled out, however, that when news breaks of the problems in the rest of the group and this could happen over the weekend - confidence in the Hong Kong subsidiary will be adversely affected. There could well be a ran on the bank.
5.
We need therefore to prepare contingency plans to deal with this situation. Inter alia, this might involve requiring the institution to take certain actions under section 52(1)(A) of the ordinance and/or appointing persons to advise in the conduct of its business (1) (B) or assuring control, either directly or indirectly, of the business (1)(C). A copy of section
52 is attached.
6.
Under section 52(1) of the ordinance, we need a trigger to do this. The only one that could be applicable at present is subsection (1) (d) - where "the Financial Secretary advises the Commissioner that he ccnsiders it in the public interest to do so".
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