A small, specialist bank whose failure was met with an overnight rescue, not closure.
Johnson Matthey traces its roots to 1817, when Percival Norton Johnson set up business in London as a gold assayer. In 1851, George Matthey joined the firm, and it became Johnson & Matthey - appointed the following year as official assayer and refiner to the Bank of England itself.
In the 1960s, the parent company formed a banking subsidiary, Johnson Matthey Bankers (JMB), which took a seat on the London Gold Fixing - the small group of banks that set the world price of gold. In the early 1980s, JMB moved beyond its bullion roots and began making high-risk loans. Its balance sheet more than doubled between 1980 and 1984, with lending concentrated in a small number of borrowers. When some of those loans turned bad, the losses grew large enough to exceed the bank's entire capital base.
Why the Bank of England acted overnight
Because JMB was one of only five members of the London Gold Fixing, Bank of England officials feared that its collapse could shake confidence in the other bullion banks and spread panic through the wider British banking system. To head that off, the Bank of England organised a rescue on the evening of 30 September 1984 - buying JMB for the nominal sum of £1 and injecting roughly £100 million (about US$146 million) of public money to keep it standing.
The rescue drew criticism at the time as a bailout of bankers using taxpayer money. The Bank of England's answer was that protecting the stability of the wider banking system justified the intervention - even though JMB's own losses, bad debts and alleged fraud were serious.
The viable parts of the business didn't disappear. Westpac Banking Corporation, Australia's largest bank, subsequently bought around 90% of JMB's assets - roughly US$1.3 billion worth, including its gold bullion, foreign-exchange and treasury operations - at a price the Bank of England said exceeded the net value of what was being taken over. The non-performing loans were kept separately within a bad-debt portfolio managed by the Bank of England, rather than being allowed to drag the viable business down with them.
The Relevance to BCCI
Johnson Matthey Bankers matters to the BCCI story for one simple reason: it was the same regulator.
The Bank of England that closed BCCI in 1991 was the same Bank of England that, seven years earlier, organised an overnight rescue for a much smaller bank carrying losses, bad debts and alleged fraud of its own. It didn't lack the tools, the authority, or the institutional appetite to rescue a troubled bank rather than close it - it had already done exactly that, hands-on, buying the bank itself for £1 and separating its good assets from its bad ones.
The circumstances were not identical. JMB was a domestic institution tied to a systemically important market - the London gold price - while BCCI was a sprawling international bank facing allegations across dozens of jurisdictions. But the underlying regulatory toolkit - take control, separate viable operations from impaired ones, sell the good parts, absorb the losses centrally - was precisely the toolkit BCCI's own Abu Dhabi-backed restructuring programme was trying to apply in 1990 - 91, with the Bank of England's own supervisors involved in developing it.
If the Bank of England could act, overnight, to separate JMB's good business from its bad debts and preserve it under new ownership, the question this case leaves standing is: why was a comparable path not given more time to work for BCCI, when its majority shareholder was already funding one?