TNAG-2245-FCO40-3228-Bank-of-Credit-and-Commerce-Hong-Kong-Limited-(BCCHK)-1991 — Page 238

CONFIDENTIAL UK COMMS ONLY

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MDHOAN 136

ONLY. MOREOVER, THE LEVEL OF COMPENSATION INVOLVED IS SUBSTANTIALLY LESS AT THIS STAGE THAN THAT WHICH WOULD HAVE BEEN

PROVIDED UNDER THE DPF. THE INITIAL REQUEST FOR SOME FORM OF RELIEF FOR SMALL DEPOSITORS, AND THE DECISION TO ALLOW THIS LOAN SCHEME CAME FROM THE COURT (WHICH STRESSED THE NEED FOR A JUST

AND EQUITABLE SOLUTION FOR ALL CREDITORS) AND NOT FROM THE BANK. THE SCHEME IS WITHOUT PREJUDICE TO ANYONE ELSE'S INTEREST, AND THE RELATIVELY LOW FIGURE WAS INTENDED BY THE SHAREHOLDERS TO MINIMISE THE RISK OF SETTING A WORLDWIDE PRECEDENT.

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7. POSSIBLE RESTRUCTURING IS NOW A QUESTION FOR THE PROVISIONAL LIQUIDATOR. THE CHANCES OF SUCCESS CANNOT BE ASSESSED VERY ACCURATELY AT THIS STAGE (WHICH WAS ANOTHER REASON FOR THE BANK OF ENGLAND'S PREFERENCE FOR FORMAL LIQUIDATION) AND IN ANY CASE THERE CAN BE NO QUESTION OF THE BCCI RE-OPENING IN THE UK IN ANYTHING LIKE ITS PREVIOUSLY EXISTING FORM.

8. THE SERIOUS FRAUD OFFICE CONTINUES TO EXAMINE DOSSIERS SUBMITTED TO IT BY THE BANK OF ENGLAND. IN THE US THE NEW YORK STATE ATTORNEY MORGENTHAU HAS BROUGHT CHARGES AGAINST SOME INDIVIDUALS AND BCCI AND MORE SEEM LIKELY TO FOLLOW. THE FEDERAL RESERVE HAS BROUGHT CHARGES AGAINST A NUMBER OF INDIVIDUALS AND TWO INSTITUTIONS AND LEVIED A SUBSTANTIAL (200 MILLION DOLLARS) FINE. IN THE UK THE GOVERNMENT AND THE BANK OF ENGLAND ARE COLLABORATING FULLY WITH THE ENQUIRY BY LORD JUSTICE BINGHAM.

9. THERE WILL UNDOUBTEDLY BE LESSONS TO APPLY TO THE INTERNATIONAL ARRANGEMENTS FOR BANKING SUPERVISION IN THE FUTURE. APPROPRIATE BODIES ALREADY EXIST IN THE G10 AND EC GOVERNORS FOR DISCUSSION OF THESE ISSUES. IT MAY BE STILL PREMATURE TO DRAW FIRM CONCLUSIONS NOW BUT THE UK WILL BE TAKING A LEADING PART IN THOSE DISCUSSIONS.

10. IT WOULD BE HELPFUL TO FCO DEPARTMENTS IF, WITHOUT EXPLICITLY SOLICITING INFORMATION, ABU DHABI COULD REPORT ANY INDICATIONS THEY RECEIVE ON THE MAJORITY SHAREHOLDERS' INTENTIONS CONCERNING THE OPERATION OF BCCI IN OTHER COUNTRIES, AND IF OTHER POSTS COULD REPORT ON ACTION TAKEN BY THE SUPERVISORY AUTHORITIES IN THEIR RESPECTIVE COUNTRIES CONCERNING THE LIQUIDATION OR OTHERWISE OF BCCI.

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