Following the regulatory action of 5 July 1991, BCCI did not immediately pass into final liquidation. In the United Kingdom, the High Court initially appointed provisional liquidators, while discussions continued over whether parts of the Bank could be rescued, reconstructed or reopened.
When the matter returned to the High Court on 30 July 1991, the provisional liquidators supported an application for additional time to explore a possible restructuring with the Abu Dhabi majority shareholders. Creditors and former employees also supported allowing further discussions to take place. Those negotiations continued during the following months but ultimately did not result in an agreed rescue or reopening of BCCI.
Formal winding-up followed. BCCI S.A. was ordered into liquidation in Luxembourg on 3 January 1992 and in England on 14 January 1992, while related BCCI and ICIC entities entered liquidation in other jurisdictions. BCCI Holdings was subsequently placed into liquidation in June 1992.
The liquidation developed into one of the largest and most complex cross-border insolvency exercises undertaken at that time. BCCI had operated through branches, subsidiaries and affiliated companies across numerous countries, requiring coordination between courts, liquidators and creditors in several different legal jurisdictions. The process involved the recovery and sale of assets, settlement of creditor claims, litigation against third parties and arrangements for sharing recoveries among the principal BCCI estates.
Despite early predictions that depositors might recover only a small proportion of their claims, the eventual outcome was substantially better. Creditors of the principal BCCI entities ultimately recovered approximately 90 per cent of their admitted claims, with higher recoveries in some jurisdictions. In Hong Kong, distributions reportedly exceeded the original amount of certain claims once interest and other adjustments were taken into account.
These substantial recoveries do not, by themselves, establish that BCCI was financially sound at the date of closure. They do, however, demonstrate that considerable value remained within the Group and was ultimately recovered through asset realisations, settlements and litigation. They are therefore relevant when assessing descriptions of BCCI as a bank whose assets had simply disappeared following an inevitable financial collapse.
The liquidation was also exceptionally prolonged and expensive, continuing for more than two decades and generating substantial professional, legal and administrative costs. The English liquidation alone recorded receipts of more than US$4 billion by January 2009, illustrating both the scale of the assets ultimately recovered and the complexity of administering the estate.
The long liquidation therefore became an important part of BCCI's history in its own right. It enabled substantial sums to be returned to creditors, but it also raises a broader question about the economic and human consequences of immediate worldwide closure compared with the restructuring and separation of viable operations that had been under consideration before July 1991.
The liquidation should consequently be distinguished from the original decision to close BCCI. Closure was a regulatory decision taken in July 1991; liquidation was the lengthy legal and financial process that followed after subsequent attempts to achieve a rescue or restructuring were unsuccessful.
For further details on the court proceedings, creditor distributions, settlements, asset recoveries and liquidation costs, see Liquidation.
