Closure on 5 July 1991 did not mean that BCCI immediately entered final liquidation. In England, the High Court first appointed provisional liquidators, while consideration continued over whether parts of the Bank could still be rescued, reconstructed or reopened.
When the case returned to the High Court on 30 July 1991, the provisional liquidators supported giving the Abu Dhabi majority shareholders more time to explore the reopening of the bank. Creditors and former employees also supported allowing the matter to be explored by Abu Dhabi.
Abu Dhabi's efforts did not result in any agreement and were abandoned in the face of new requirnments reportedly being imposed by the Bank of England . The courts in England and Luxembourg proceeded to allow BCCI S.A. to enter compulsory liquidation on 3 January 1992 and in England on 14 January 1992, with BCCI Holdings following in June 1992.
At the time of its closure, BCCI was widely portrayed as effectively bankrupt - a bank whose assets had largely vanished and whose creditors faced the prospect of recovering little or nothing. The final outcome of the liquidation told a very different story: depositors ultimately recovered more than 90% in many jurisdictions, and in Hong Kong recoveries exceeded 100%.
The eventual outcome was very different.
Draft consolidated accounts prepared for discussion on 4 July 1991 recorded BCCI Group assets of approximately US$19.3 billion, including the financial support already provided by the Abu Dhabi majority shareholders.
Over the following years, recoveries came from a combination of BCCI’s existing assets, loan and asset realisations, litigation and settlements, together with substantial contributions and concessions from Abu Dhabi.
Creditors of the principal BCCI estates eventually recovered more than 90% of their admitted claims. In Hong Kong, creditors were repaid in full and subsequently received post-liquidation interest, taking total distributions above 100% of their original claims.
Why did the liquidation take so long and cost so much?
The liquidation continued for more than two decades and generated very substantial professional, legal and administrative costs.
This raises an important question because BCCI did not consist only of difficult or impaired assets. It also held substantial liquid funds placed with other banks and a large portfolio of performing loans, many of them trade-related and self-liquidating in nature.
According to the US Government Accountability Office, by January 2011 the BCCI estates had collected approximately US$8.6 billion, while liquidation costs had reached about US$1.7 billion.
The scale of the eventual recoveries therefore raises a further question: why did the liquidation require more than twenty years and incur such substantial costs when significant liquid assets and performing, self-liquidating loans formed part of BCCI’s asset base?