Issue in Corporate Failure of Bank of Credit and Commerce International (Bcci)
Issue in Corporate Failure of Bank of Credit and Commerce International (BCCI)
Introduction and background:
Bank of Credit and Commerce International known as BCCI was founded by Pakistani financer Mr. Agha Hasan Abedi in 1972. It’s headquarter was located in London and was incorporated in Luxembourg. BCCI was ranked 7th largest private bank with total assets which amounts to $20.6 billion. By the end of 1988, BCCI’s network included 417 offices in 73 countries. The annual report noted that the bank now served 1.3 million customers through 14,000 staff members of 90 nationalities. (Peter et al. 1992)
BCCI was initially funded by rich Arab businessmen who wanted high return on their investment without taking big risks. They haven’t got any solid base of finance since incorporated as they were dependent on their depositors to meets its operating expenses. The Bank of America initially held 25% of BCCI shares which they sold in 1980. BCCI’s main objective was to achieve rapid growth as it wanted to be become global bank which can represent third world. They gambled on futures and options trading and gave some high risk loans. It also raised millions of revenue by accounting techniques to show false profits and hided their losses which occur in trading and bad debt.
The biggest bank fraud in history
According to Manhattan District Attorney Robert M. Morgenthau, the BCCI scandal that came to light in 1991 was 'the largest bank fraud in world history.' Perhaps no other criminal enterprise has involved or at least embarrassed so many prominent people, from billionaire Arab sheikhs to Third World dictators to present and former leading figures in the U.S. and British governments. Certainly none could match the international web of financial chicanery, political intrigue, and unsavoury figures with which BCCI was said to be associated. (Source: Encyclopaedia Encarta 2007)
BCCI was engaged in four major frauds. One was a cover-up of $633m of losses on treasury trading.
Introduction and background:
Bank of Credit and Commerce International known as BCCI was founded by Pakistani financer Mr. Agha Hasan Abedi in 1972. It’s headquarter was located in London and was incorporated in Luxembourg. BCCI was ranked 7th largest private bank with total assets which amounts to $20.6 billion. By the end of 1988, BCCI’s network included 417 offices in 73 countries. The annual report noted that the bank now served 1.3 million customers through 14,000 staff members of 90 nationalities. (Peter et al. 1992)
BCCI was initially funded by rich Arab businessmen who wanted high return on their investment without taking big risks. They haven’t got any solid base of finance since incorporated as they were dependent on their depositors to meets its operating expenses. The Bank of America initially held 25% of BCCI shares which they sold in 1980. BCCI’s main objective was to achieve rapid growth as it wanted to be become global bank which can represent third world. They gambled on futures and options trading and gave some high risk loans. It also raised millions of revenue by accounting techniques to show false profits and hided their losses which occur in trading and bad debt.
The biggest bank fraud in history
According to Manhattan District Attorney Robert M. Morgenthau, the BCCI scandal that came to light in 1991 was 'the largest bank fraud in world history.' Perhaps no other criminal enterprise has involved or at least embarrassed so many prominent people, from billionaire Arab sheikhs to Third World dictators to present and former leading figures in the U.S. and British governments. Certainly none could match the international web of financial chicanery, political intrigue, and unsavoury figures with which BCCI was said to be associated. (Source: Encyclopaedia Encarta 2007)
BCCI was engaged in four major frauds. One was a cover-up of $633m of losses on treasury trading.
Bibliography: • Kanas, A., 2004. Contagion in Banking due to BCCI’s Failure: Evidence from National Equity Indices. International Journal of Finance and Economics [Online] 224 (9), p. 245-255. • Mohamedi, F., 1991. Political Economy: The Fall of BCCI. Middle East Report, No. 173, Gender and Politics [Online] Nov-Dec., pp. 36-37. Middle East Research and Information Project. Available at: http://www.jstor.org/stable/3012630?origin=JSTOR-pdf [Accessed 25th April 2008] • Passas, N., 1996 Available at: http://www.jstor.org/stable/1410467?origin=JSTOR-pdf [Accessed 23rd April 2008] • Spalek, B., 2001