Shareholding

BCCI was established as a privately owned commercial bank. As it expanded internationally, it created banking subsidiaries, affiliates and associated companies under its parent company, BCCI Holdings (Luxembourg) S.A. Together, these entities were known as the BCC Group, or informally as BCCI.

The shares of BCCI Holdings were not quoted on any stock exchange. Ownership was held by private investors, members of Middle Eastern ruling families, business groups, institutional bodies and staff-benefit organisations. During the Bank’s final period, the majority interest was held by the Ruler of Abu Dhabi, members of the Abu Dhabi ruling family, the Government of Abu Dhabi and associated institutions.

Establishment and Bank of America’s investment, 1972

When the Bank of Credit and Commerce International S.A. was established in Luxembourg in 1972, its initial capital was US$2.5 million. Bank of America National Trust and Savings Association subscribed for 25 per cent of the initial capital, while the remaining shares were held principally by investors from the Middle East and Gulf region, including members of the ruling families of Abu Dhabi and Dubai.

Agha Hasan Abedi, BCCI’s Founder and President, considered the participation of a major international bank important to the credibility and development of the new institution. He therefore persuaded Bank of America, then one of the world’s largest banks, to become a founding shareholder.

For Bank of America, the investment offered an indirect entry into the rapidly developing Middle Eastern market at a time when the full significance of the region’s expanding oil revenues and accumulation of petrodollar deposits was only beginning to emerge.

Bank of America’s interest was subsequently increased from 25 per cent to approximately 30 per cent.

Changing relationship with Bank of America

As oil revenues increased during the 1970s, major international banks sought to establish their own direct presence in the Middle East. Bank of America similarly wished to operate branches in the region, which would have placed its own branches in competition with BCCI branches.

At the same time, BCCI had developed a substantial international network and no longer depended upon a special relationship with Bank of America. Its expansion also took it into countries and markets where Bank of America already had direct or indirect interests.

BCCI’s relationships with Middle Eastern customers and investors also made entry into the United States market strategically important. However, United States banking regulations restricted BCCI’s ability to pursue such expansion while Bank of America continued to hold a substantial interest in the Bank.

Bank of America therefore gradually reduced its shareholding. It initially allowed its percentage interest to decline by not fully subscribing to subsequent rights issues and later disposed of its remaining shares. Its withdrawal was completed during the latter part of the 1970s.

Bank of America issued a press release dated 1 September 1978 concerning its relationship with BCCI, its assessment of BCCI’s management practices and the disposal of its shareholding.

Sale of the Bank of America shares

There was an understanding with Agha Hasan Abedi, the President of BCCI, that Bank of America’s shares would be acquired and ultimately held for the benefit of BCCI employees.

A loan was reportedly extended through International Credit and Investment Company (Overseas) Limited, an ICIC company registered in the Cayman Islands, to finance the acquisition of the shares. The shares acquired through ICIC were subsequently transferred to staff-benefit bodies, including the ICIC Staff Benefit Trust and the ICIC Staff Benefit Fund.

ICIC companies

ICIC (Overseas) was incorporated in the Cayman Islands on 6 April 1976 as an offshore banking and investment company. It was owned by ICIC Holdings Limited, incorporated on the same date as the holding company for the ICIC group. Its stated activities included private banking and facilitating transactions in BCCI shares, although subsequent investigations concluded that it was effectively controlled by senior BCCI management and used for a much wider range of transactions.

Following BCCI’s closure, investigations alleged that certain ICIC companies had been controlled or influenced by senior BCCI executives and used in connection with nominee shareholdings, undisclosed transactions, concealment of BCCI’s financial interests and losses, and the facilitation of false accounting.

These allegations concerned the control and use of particular ICIC companies and should not automatically be applied to every trust, fund or institution carrying the ICIC name.

The ownership, purpose, governance, funding and transactions of each ICIC entity therefore need to be examined separately when assessing its role in relation to the BCCI Group.

The Cayman Islands context

Before the establishment of ICIC Overseas in 1976, Bank of Credit and Commerce International (Overseas) Limited was incorporated in the Cayman Islands on 25 November 1975 as a wholly owned subsidiary of BCCI S.A.

It was established as part of the reorganisation of BCCI’s rapidly expanding international operations and enabled the Group to operate a second banking network, principally across Asia, Africa and other overseas markets.

Following the formation of BCCI Holdings (Luxembourg) S.A., both BCCI S.A. and BCCI Overseas became wholly owned banking subsidiaries of the Luxembourg parent company.

The use of Cayman Islands companies and trusts was not unique to BCCI. The Cayman Islands had developed into a major international banking, corporate and trust centre because of their tax-neutral environment, flexible company legislation and established confidentiality arrangements.

Many international banks, investment companies and trust organisations, including subsidiaries and affiliates of leading global financial institutions, were registered in the Cayman Islands and continue to maintain a presence there.

ICIC Staff Benefit Trust and Staff Benefit Fund

The ICIC Staff Benefit Trust was constituted as a discretionary trust for the benefit of employees and former employees of the BCCI Group and their dependants.

The ICIC Staff Benefit Fund also held assets for staff-benefit purposes. Shares in BCCI acquired or held through ICIC companies were subsequently transferred to these staff-benefit bodies.

Some members of the governing or supervisory bodies of the Trust were senior executives of the BCCI Group. Nevertheless, the Staff Benefit Trust and Staff Benefit Fund were legally separate entities from the ICIC trading and investment companies.

The distinction is important. The ICIC companies were closely connected with BCCI’s corporate and financial operations, whereas the Staff Benefit Trust and Staff Benefit Fund were beneficial institutions established to hold assets for employees, former employees and their families.

Khalid bin Mahfouz

Khalid bin Mahfouz was a prominent Saudi banker, a substantial shareholder in BCCI and, for a period, a non-executive director of the Bank. He was closely associated with the National Commercial Bank of Saudi Arabia.

During the latter part of the 1980s, Khalid bin Mahfouz and members of his family held an aggregate interest of approximately 20 per cent in BCCI and was a member of the Board of Directors. This made the family one of the Bank’s most significant private shareholder groups during that period.

Abu Dhabi financial support and majority ownership, 1990

By 1990, BCCI required substantial additional financial support and capital restructuring.

As part of the support arrangements, the Ruler of Abu Dhabi, the Crown Prince, the Government of Abu Dhabi and associated Abu Dhabi institutions increased their investment in the BCCI Group.

By April and May 1990, Abu Dhabi-related shareholders and institutions had acquired an aggregate majority interest of approximately 77 per cent in BCCI Holdings (Luxembourg) S.A.

The acquisition formed part of a wider financial-support and restructuring package intended to strengthen the Bank’s capital position, reorganise its international operations and place the Group on a more stable basis.

Relevant contemporary ownership records include:

BCCI Holdings (Luxembourg) S.A.: List of Shareholders as at 30 April 1990

and:

BCCI Holdings (Luxembourg) S.A.: Consolidated List of Shareholders, May 1991

These documents provide important evidence of BCCI’s declared ownership immediately before its closure.

Position immediately before the closure in 1991

Immediately before BCCI was abruptly closed by regulators on 5 July 1991, the controlling interest was held by the Ruler of Abu Dhabi, members of the Abu Dhabi ruling family, the Government of Abu Dhabi and associated institutions, acting in their respective personal or institutional capacities.

The remaining shareholding was distributed among other Middle Eastern investors, business families and staff-benefit or associated institutional bodies.

It is therefore misleading to describe BCCI during its final period as a bank without identifiable owners. Its principal shareholders were known and wealthy, shareholder lists were supplied to the relevant regulatory authorities, and detailed ownership records were prepared in connection with securities issues, recapitalisation and restructuring arrangements.

Shareholder disclosure

As a privately held company, BCCI’s shares were not listed or traded on a public stock exchange. It was therefore not subject to the same continuous public disclosure requirements ordinarily applying to publicly quoted companies.

There was no general statutory requirement for BCCI to publish a complete shareholder list for public circulation. Details of the ownership of the relevant banking and holding companies were, however, available to the regulatory and supervisory authorities concerned.

A complete shareholder list was first published in 1983 as part of the disclosure accompanying an international securities issue.

The document was:

BCCI Holdings (Luxembourg) S.A.: List of Shareholders as at 30 June 1983

The list appeared in the prospectus issued by BCCI Finance N.V. on 22 November 1983 in connection with:

US$50,000,000 Guaranteed Floating Rate Notes due 1990

The prospectus provides an important contemporary record of BCCI’s declared ownership structure during the early 1980s.

Before the later Abu Dhabi recapitalisation, BCCI’s shareholding was broadly described as comprising:

approximately 70 per cent held by Middle Eastern investors, including members of prominent families from Abu Dhabi, Dubai and Sharjah, together with investors from Saudi Arabia, Bahrain and elsewhere; and
approximately 30 per cent held through International Credit and Investment Company (Overseas) Limited and related staff-benefit arrangements.

This earlier 70/30 description should not be applied to the position after the 1990 recapitalisation, when Abu Dhabi-related shareholders and institutions held approximately 77 per cent of BCCI Holdings.