By 1990, BCCI's financial difficulties were being subjected to increasingly detailed investigation by the Bank's management, its auditors Price Waterhouse, and representatives of the Abu Dhabi shareholders.
An internal Task Force was established to examine problem loans, impaired assets, losses and irregular transactions across the Group. Its purpose was to establish the extent of the problems, identify responsibility where possible and provide the information needed for corrective action and restructuring.
A major stage was reached with the Price Waterhouse report of 18 April 1990, which identified the need for substantial provisions and additional financial support. The findings were made known to the Bank of England and became part of the discussions taking place between BCCI, its auditors, the Abu Dhabi shareholders and the international supervisory authorities.
During the following months, the investigation continued while the Abu Dhabi interests increased their financial support and began examining BCCI's impaired and problem assets. By the sixth meeting of the College of Supervisors in October 1990, discussions were focusing not only on the scale of the financial problems but on how they could be resolved — including removing problem loans from the continuing banking businesses, providing further shareholder support and reorganising the Group.
The Abu Dhabi shareholders also established their own investigating committee to examine the problem assets and management issues. Lord Justice Bingham later described the establishment of this committee as a constructive development for which the Abu Dhabi interests deserved credit.
The importance of 1990 is therefore that BCCI's principal financial problems, impaired assets and significant management weaknesses had been identified and were being investigated with the knowledge of the supervisory authorities. At the same time, substantial shareholder support was being provided and a major restructuring programme was beginning to take shape.
This should be distinguished from the later Section 41 investigation commissioned by the Bank of England. Its draft report, delivered in June 1991, brought together a wider and more serious range of allegations, including false accounting, concealed liabilities, nominee arrangements and the use of associated companies. It became a decisive factor in the Bank of England's subsequent decision to abandon the restructuring process and move towards closure.
The two stages are therefore important to keep separate: 1990 was principally the period in which the financial shortfall and problem assets were identified, investigated and addressed; the Section 41 report of 1991 introduced a broader assessment of alleged misconduct that ultimately changed the regulators' approach.