BCCI, Facing U.S. Probes, Set to Slash Operations

Responding to entanglements in money laundering in various U.S. investigations, the Bank of Credit and Commerce International plans to dissolve its current structure and reemerge as three separate operations, according to an article in today's edition of MidEast Markets.

The newsletter, a sister publication of the American Banker, reported that the radical BCCI restructuring was being ordered by the bank's controlling shareholder, Sheik Zayid bin Sultan, the ruler of Abu Dhabi. The sheik and other Abu Dhabi officials are said to be embarrassed that their bank has become the target of federal investigations in the United States.

No Comment from Officials

BCCI officials declined to comment, but sources inside the bank confirmed that a restructuring was being planned.

The newsletter report, written by London-based correspondent Rachid Hassan, includes the following details:

Current BCCI management will be dismissed, many of the bank's international operations will be closed, and the remaining operations will be divided among the three new banks. Under the restructuring plan, BCCI's name will be changed, its operations in Latin America and Africa (except Egypt) will be closed, and two holding companies based in Luxembourg and the Cayman Islands will be abolished.

A new bank, in London, will own and operate the branches and subsidiaries to be maintained in Europe. Another, in Hong Kong, will do the same for Asia and the Pacific rim. And a third, in Abu Dhabi, where the bank has moved its main office from London, will own and operate the branches in the United Arab Emirates and Egypt.

The reorganization will be implemented by two senior British bankers who have been employed by the government of Abu Dhabi, which is continuing to interview new banking managers for the troubled operations. It is understood that much of the current management, which is largely Pakistani, will be dismissed.

BCCI's chief executive officer, Zafar Ikbal, enjoys a long-term friendship with the ruling family of Abu Dhabi and has been a hunting companion of Sheik Zayid. His position remains uncertain. He may ultimately be moved to a position in the Abu Dhabi Investment Authority or return to Pakistan.

A division will be formed within the agency to supervise the three banks. If he is removed from his position as chief executive of BCCI, Mr. Ikbal may be offered a senior role in this division.

The scrapping of the Luxembourg holding company is something of a nonevent, since it has already been ordered closed by the Duchy of Luxembourg.

The rulers of Abu Dhabi who now hold a majority stake in BCCI have decided on such drastic measures because BCCI has been so tarred with the revelations that have emerged from the continuing investigations in Washington that they do not believe it can continue to operate in its present form.

Beginning of Woes

BCCI's problems began last year, when it was accused of having a role in laundering drug money for then President Manuel Noriega of Panama. When subsequent investigation showed BCCI had acquired a large holding in First American Bankshares Inc., the Federal Reserve Board ordered BCCI in March 1991 to divest itself of all interest in the Washington-based company.

First American is the largest banking holding company in Washington and one of the top 60 in the United States.

The acquisition had been brokered by a prominent Washington lawyer, Clark Clifford, and his partner Robert Altman. Mr. Clifford, a secretary of defense under Lyndon Johnson, later became chairman of First American. U.S. authorities are investigating his involvement in the sale and possible stock benefits he may have received as a result.

Abu Dhabi's rulers and other shareholders have been deeply shaken by the possibility that they might be named in a formal indictment. The shareholders had to provide a written affidavit in which they clearly declared that the money with which they bought First American Bankshares was their own and that BCCI had not played a role in financing the deal.

The most worrisome aspect of the BCCI scandal for Abu Dhabi's rulers is that there may be more disclosures to come.

A senior BCCI aide was recently offered immunity by U.S. prosecutors in return for his full testimony about the First American acquisition and related matters.

Following this offer, BCCI's CEO, Mr. Ikbal, made a number of trips to Washington that may have resulted in the decision to close BCCI's operations in the United States and to restructure the rest of the bank's worldwide operations.

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