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first opportunity for action to be taken in Hong Kong was therefore on the morning of Wednesday, 3 July. information given to me by my representative was that the Bank of England had received a report from Price Waterhouse in London of suspected fraud in BCCI SA and BCCI Overseas, neither of which operate in Hong Kong. As a result, the proposals for restructuring the Group were effectively dead and it would not be possible to produce a set of 1990 accounts for the BCC Group. I was further advised by my representative, who had seen the report, that there was no mention of ECCHK being involved in the suspected fraud.
10. Although the crisis did not seem directly to involve
BCCHK, there was clearly a risk that confidence in BCCHK could be adversely affected. I felt it necessary therefore to put various contingency measures in place, including the formation of a team of bank examiners which was sent into the bank on Thursday, 4 July to examine its loan book so that our assessment of the bank's financial position could be brought up to date. I also discussed the position with BCCHK's clearing bank, HongkongBank, and arranged that they would provide me with an adviser. I saw this as providing not only assistance to me but also reassurance to depositors that their interests were being protected. (The person selected was Mr Colin Selby, a senior and experienced banking officer, who was currently Head of Internal Audit. Because he was on leave at the time, he did not became available until late on the afternoon of Sunday, 7 July.) In addition, I held discussions with the manage nent of BCCHK and its auditors to obtain their current assessment of the bank's financial position. Without revealing the precise nature of my concern, I explained to the management of the bank that I understood that there were some problems in the rest of the Group that were delaying finalisation of the 1990 accounts and that BCCHK should ensure that it maintained high liquidity.
11. I had briefed the Secretary for Monetary Affairs and
the Financial Secretary about the situation on Wednesday, 3 July and I kept them informed thereafter. On Friday, 5 Ju..y I sent a memo to the Financial Secretary stating that while, on the information we had available, BCCHI was "solvent and viable", the bank could nonetheless, through no fault of its own, become caught up in the wider problems of the rest of the Group. I considered that I might have to use my powers under section 51 of the Banking Ordinance to place restrictions on the bank, appoint persons to advise it
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