Following the abrupt closure of BCCI on 5 July 1991, a number of official, parliamentary and independent reports were produced to examine the Bank’s operations, regulatory supervision and the circumstances leading to its shutdown. These reports played a major role in shaping the subsequent narrative and public understanding of BCCI.
Among the most frequently cited is The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate (1992), commonly known as the Kerry Report. It examined BCCI’s activities in the United States and considered wider allegations concerning its international operations, ownership, relationships and management.
In the United Kingdom, Lord Justice Bingham’s report on the supervision of BCCI, published in October 1992, became a principal source on the role of the Bank of England and the regulatory arrangements surrounding BCCI.
These reports were prepared within particular legal, regulatory and political contexts. Although they contain important evidence and findings, their scope, methodology and conclusions have been interpreted differently by regulators, politicians, journalists, academics, former employees and other commentators.
The Draft Price Waterhouse Section 41 Report (June 1991)
Another document of major importance was the report prepared under section 41 of the Banking Act 1987 by BCCI’s external auditors, Price Waterhouse. A draft was submitted to the Bank of England in late June 1991 and became an important factor in the regulatory decision-making that led to BCCI’s closure, notwithstanding that the Abu Dhabi majority shareholders had committed financial support to stabilise BCCI.
The status of the Section 41 report as a draft is significant. Any assessment of the reliance placed upon it should consider its preliminary nature, the evidence and qualifications supporting its allegations, whether BCCI and its principal shareholders were given a proper opportunity to respond, and Price Waterhouse’s own concerns expressed to the Bank of England about the proposed closure of BCCI.
Memorandum by Price Waterhouse - 5 February 1992
Price Waterhouse later submitted a memorandum entitled Banking Supervision and BCCI: International and National Supervision to the UK Treasury and Civil Service Committee on 5 February 1992. It stated that the motive was not merely personal enrichment and suggested that a scheme involving fictitious profits and inflated capital had developed to support BCCI’s rapid expansion, conceal losses and meet increasing Group overheads.
By 1990, BCCI and its auditors had identified a substantial financial shortfall, which was disclosed to the Abu Dhabi shareholders. Abu Dhabi subsequently acquired a 77 per cent majority shareholding and provided substantial financial support for the recapitalisation and restructuring of BCCI’s worldwide operations, as also described in a BBC programme on the Bank.
The language used is important. Expressions such as “it appears” reflected conclusions reached from the information then available rather than findings determined through a completed judicial process. The allegations nevertheless became central to later reports and descriptions of BCCI.
Reviewing the Reports in Context
The various post-closure reports should not necessarily be treated as a single, uniform body of evidence. They were prepared by different organisations for different purposes and examined different aspects of BCCI. Some focused on alleged misconduct, while others considered regulatory supervision, auditing, ownership, political relationships, banking controls or the actions taken immediately before closure.
This Perspective section reviews the principal allegations under Key Allegations Against BCCI and findings contained in these reports alongside relevant documents, contemporary records and additional evidence. Its purpose is not to disregard the reports, but to place their conclusions in context and enable readers to consider the evidence, limitations and differing interpretations for themselves.