Following the action of 5 July 1991, when BCCI was abruptly closed by the supervisory authorities led by the Bank of England and the Luxembourg Monetary Authority, 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 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 involved a major cross-border insolvency exercise. BCCI had operated through branches and subsidiaries of Bank of Credit and Commerce International S.A., Luxembourg, and Bank of Credit and Commerce International (Overseas) Ltd, Grand Cayman, together with affiliated companies across numerous countries. This required coordination between courts, liquidators and creditors in several different legal jurisdictions.
The liquidation process involved the realisation and sale of assets, settlement of creditor claims, litigation against third parties, and arrangements for pooling and sharing recoveries among the principal BCCI estates.
Despite statements following the closure that depositors might recover little or nothing, creditors of the principal BCCI entities eventually received over 90 per cent of their admitted claims. In Hong Kong, creditors were repaid in full and subsequently received post-liquidation interest.
The level of these recoveries should be considered alongside the substantial value and financial support already available to the BCCI Group around the time of closure.
The draft consolidated accounts for BCCI Holdings (Luxembourg) S.A. for the year ended 31 December 1990, prepared for discussion on 4 July 1991, recorded total Group assets of approximately US$19.305 billion after taking account of the Abu Dhabi support arrangements. These included approximately US$5.562 billion in cash and amounts due from banks and US$4.480 billion in promissory notes and securities.
The Abu Dhabi support arrangements were themselves substantial. Of the promissory notes recorded in the accounts, approximately US$3.061 billion had been issued by the Government of Abu Dhabi as part of the financial support package. The package also included a US$750 million guarantee, a share subscription ultimately increased to US$650 million, and provision of up to US$600 million to cover substantiated unrecorded deposits. The overall potential support package was therefore approximately US$5.1 billion.
The significance of this support is particularly important because it formed part of the restructuring programme being developed before BCCI was closed. The Abu Dhabi majority shareholders had committed themselves to maintaining the Group's capital base while the proposed reorganisation and restructuring were undertaken, and further support was contemplated as part of that process.
Following closure, Abu Dhabi also became a major source of funds available to creditors under the subsequent settlement and pooling arrangements. Its contribution therefore formed an important part of the eventual distributions and should be distinguished from amounts generated solely through liquidation recoveries or litigation.
The eventual creditor payout consequently resulted from a combination of BCCI's existing assets, cash and banking balances, realisation of loans and other assets, settlements and litigation recoveries, together with substantial financial contributions and concessions from the Abu Dhabi majority shareholders.
This is relevant when assessing suggestions made at the time of closure that little or no value might remain for depositors. It also demonstrates that BCCI's assets had not simply disappeared following its abrupt closure.
The liquidation itself was exceptionally prolonged and expensive. It continued for more than two decades and generated very substantial professional, legal and administrative expenses. According to the US Government Accountability Office, by January 2011 the BCCI estates had collected approximately US$8.6 billion, against claims of approximately US$8.5 billion, while approximately US$6.5 billion had by then been paid to secured and unsecured creditors. The same report recorded total liquidation costs to the estates of approximately US$1.7 billion.
These figures are important in assessing the liquidation as a whole. The eventual recovery of more than 90 per cent for creditors was achieved after very substantial liquidation costs and over a period extending beyond twenty years. The high level of distributions cannot therefore be viewed solely as evidence of the effectiveness of the liquidation process; it must also be considered in light of the assets, recoverable value and substantial shareholder support that existed or became available to the estates.
The high creditor payout also raises a broader question concerning the economic and human consequences of the decision to close BCCI worldwide in July 1991. At that time, a restructuring programme was already being developed which contemplated separating impaired assets and historic problems from viable banking operations, with substantial financial backing from the Abu Dhabi majority shareholders.
The relevant historical question is therefore not simply how much the liquidators ultimately recovered, but whether viable parts of the BCCI Group could have been preserved through restructuring rather than subjected to immediate worldwide closure and a liquidation lasting more than two decades.
For further details on the court proceedings, creditor distributions, settlements, asset recoveries and liquidation costs, see Liquidation.