Following BCCI’s closure in July 1991, pressure from depositors, creditors and former employees, together with questions raised in Parliament - notably by Keith Vaz MP - led to demands for an independent inquiry into the supervision of BCCI by the Bank of England.
The UK Chancellor of the Exchequer and the Governor of the Bank of England appointed Lord Justice Bingham to examine the supervision of BCCI under the Banking Acts, whether the actions taken by the UK authorities had been appropriate and timely, and to make recommendations. His report, Inquiry into the Supervision of the Bank of Credit and Commerce International, was published in October 1992. It was not a comprehensive investigation into every circumstance surrounding BCCI’s closure.
Bingham identified significant errors of judgment and shortcomings in the Bank of England’s supervision of BCCI, but rejected allegations of dishonesty or bad faith. He also considered closure to have been an appropriate course of action, although the Inquiry did not undertake a detailed and independent examination of every circumstance leading to that decision.
Information concerning BCCI was also provided by other UK authorities and public bodies, including HM Customs and Excise, the Department of Trade and Industry, financial-services regulators, the intelligence services and other government departments. The published Report does not indicate that this information had previously led the Bank of England to consider the worldwide closure of BCCI necessary.
The Abu Dhabi majority shareholders challenged the accuracy of a number of notes and minutes supplied by the Bank of England. They also disputed statements made about them in their absence. Their challenges and responses, however, were not fully and properly recorded or examined in the published Bingham Report.
Scope, criticism and unanswered questions
Although assessing whether regulatory action had been appropriate and timely fell within the Inquiry’s terms of reference, the Report did not set out a detailed comparison between closure and the Abu Dhabi-backed restructuring programme available at the time. Yet, Lord Justice Bingham concluded that closure was appropriate without comprehensively examining the principal alternative then available!
The Bingham Report also did not comprehensively examine the nature and extent of the Bank of England’s contacts with US authorities; whether excluding the UAE Central Bank from the final closure discussions was proper; whether the serious concerns alleged in the Bank of England-commissioned Section 41 report, which was submitted in draft form, had already been identified and were being addressed; or whether Abu Dhabi should have been given an opportunity to address any remaining concerns through the proposed restructuring programme.
This raises a fundamental question:
Should the Bingham Report properly be relied upon as a complete justification for the Bank of England’s decision to close BCCI when the Inquiry did not conduct a comprehensive and independent examination of the closure decision and all the available alternatives?