CONFIDENTIAL
CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 2179
OF 091039Z JULY 91
HkB 102
102/2
The Da
SCEF
15. 1991
PA
REGISTRY
фес
052026 MDHIAN 4704
New
Ele
YR TELNO 172: BANK OF CREDIT AND COMMERCE HONG KONG LTD (BCCHK)
1. YOU MAY WISH TO BE AWARE OF THE LATEST DEVELOPMENTS ON BCCHK.
2. WE FIRST BECAME AWARE OF THE PROBLEMS OF THE BCCI GROUP DURING THE COURSE OF LAST WEEK. SINCE BCCHK IS A COMPLETELY SEPARATE ENTITY FROM THE REST OF THE BCCI GROUP AND SINCE WE HAD NO EVIDENCE THAT ITS OPERATIONS HERE WERE UNSOUND, OUR INITIAL CONCERN WAS TO TRY TO KEEP THE BANK OPEN AFTER THE NEWS OF THE PROBLEMS OF THE GROUP WERE BROKEN IN THE EVENING OF FRIDAY 5 JULY (HK TIME). BCCHK MANAGED TO TRADE RELATIVELY NORMALLY ON SATURDAY 6 JULY, ALTHOUGH SOME WITHDRAWALS OF DEPOSITS WERE MADE.
3. SEPARATELY, JOHN ASPDEN OF THE OFFICE OF THE COMMISSIONER OF BANKING (OCB) FLEW TO ABU DHABI TO HOLD DISCUSSIONS OVER THE WEEKEND WITH THE GOVERNMENT OF ABU DHABI. HOWEVER, IT BECAME CLEAR ON SUNDAY 7 JULY THAT THE GOVERNMENT OF ABU DHABI WAS UNWILLING TO PROVIDE THE NECESSARY FINANCIAL BACKING FOR BCCHK.
4. IN THE ABSENCE OF SUPPORT FROM THE MAJOR SHAREHOLDERS, AND GIVEN THAT THE POSSIBILITY OF A DISORDERLY WITHDRAWAL OF CASH COULDNT BE RULED OUT, THE COMMISSIONER OF BANKING HAS INSTRUCTED BCCHK NOT TO OPEN FOR BUSINESS FROM MONDAY 8 JULY UNTIL FURTHER NOTICE AND ASSUMED CONTROL OF THE BANK. RESTRICTIONS HAVE BEEN PLACED ON THE BANK'S BUSINESS TO FREEZE DEPOSITS AND PREVENT THE MOVEMENT OF FUNDS OUT OF THE BANK.
5. THE PRESENT SITUATION WHEREBY THE OCB IS IN CONTROL OF THE BANK IS NEITHER A STABLE NOR A LONG TERM ONE. THERE ARE ALREADY INDICATIONS THAT THE FABRIC OF THE BUSINESS MAY BE UNRAVELLING (E.G. THROUGH STAFF LEAVING) AND THERE IS A RISK THAT ASSETS MAY DISAPPEAR. THE LATEST INDICATION FROM THE GOVERNMENT OF ABU DHABI IS THAT IT WOULD BE PREPARED TO SELL THE BANK, IF NECESSARY AT A DISCOUNT TO NET ASSET VALUE. A NUMBER OF PARTIES HAVE EXPRESSED INTEREST IN BUYING THE BANK AND ONE OF THEM HAS ALREADY MADE AN INDICATIVE OFFER. HOWEVER, IF FOR WHATEVER REASONS THE SALE OF THE BANK FALLS THROUGH, THE ONLY VIABLE ALTERNATIVE IS
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