TNAG-2245-FCO40-3228-Bank-of-Credit-and-Commerce-Hong-Kong-Limited-(BCCHK)-1991 — Page 63

12 September 1991

The Chairman

BCC Depositors Committee

c/o 61 Wyndham Street Anson House

Mezz Floor

Central

Hong Kong

DIEU

Foreign & Commonwealth

Office

58

thas 102/13

London SWIA 2AH

Welephone: 071-

Dear Sv.

You wrote to Lord Caithness on 22 July protesting about the handling of the BCC (HK) crisis by the Hong Kong Government. I have been asked to reply and apologise for the delay in replying to your letter.

The BCCI affair and its ramifications around the world have unfortunately caused problems and hardship in many places. The decision by the Hong Kong banking authorities to allow BCC (HK) to remain open on 6 July was quite properly taken having regard to the facts which were then available and in the knowledge that a closure of a bank is a drastic step and one not to be taken lightly. The subsequent decision to close the Bank was taken with similar considerations in mind. The Hong Kong Government have accepted that the Commissioner of Banking took the right decisions at each stage with the objective of protecting the interests of depositors and maintaining the integrity of the banking system.

The subsequent runs on the Standard Chartered Bank and Citibank were not directly connected with BCC (HK)'s difficulties, but were possibly exacerbated by the climate of investor anxiety which then existed. The Hong Kong Government did not, "rescue" these two Banks, limiting its help to a statement of support which was closely followed by similar statements by the Hong Kong and Shanghai Bank and Bank of China. These statements had the effect of curbing the runs and restoring confidence.

You mention a withdrawal of HK$1.8 bn of funds from BCC (HK) on Saturday 6 July. In fact the actual net loss to the Bank over the weekend in question was limited to HK$27 m. This was in part due to quick action by the Commissioner of Banking who took steps to stop all payments by BCC (HK) and its clearing banks.

JIFABA

TG