Mr Major’s Commons Statement on BCCI – 22 July 1991
Below is the text of Mr Major’s statement to the House of Commons on the Bank of Credit and Commerce International (BCCI), held on Monday 22nd July 1991.
PRIME MINISTER:
Mr. Neil Kinnock (Islwyn) (by private notice) : To ask the Prime Minister if he will make a statement about knowledge of, and understanding of, the operations of the Bank of Credit and Commerce International over the years before June this year.
The Prime Minister (Mr. John Major) : My right hon. Friend the Chancellor of the Exchequer made a statement to the House on Friday and indicated that the Government will commission an independent inquiry into precisely those matters. I am now able to tell the House that the inquiry will be undertaken by Lord Justice Bingham, and that the terms of reference will be as follows :
To inquire into the supervision of BCCI under the Banking Acts; to consider whether the action taken by all the United Kingdom authorities was appropriate and timely; and to make recommendations.
All the matters that the right hon. Gentleman raised today will be covered in Lord Justice Bingham’s inquiry. He will have access to all relevant papers, officials and Ministers. Nothing and no one will be held back. I assure the House that any relevant matter of any sort will be made available to Lord Justice Bingham. The conclusions of the inquiry will be made public.
Mr. Kinnock : I am grateful to the Prime Minister for responding to my request to make a statement. Is he aware that simply re-announcing the inquiry and the name of the person who will head it is not an adequate answer to the questions being raised by the public? Is he further aware that since that inquiry itself had to be prised out of the Government, it would be much more appropriate for the Prime Minister to give us now the answers which he can give us from his own knowledge as a result of having been both Prime Minister and Chancellor of the Exchequer?
Is the Prime Minister aware that, in the 17 days since the BCCI was closed, it has become evident that in March 1990 the auditors – Price Waterhouse – reported that the BCCI was in near-bankruptcy and had repeatedly made huge non-performing loans, some to individuals who did not even exist, and secondly, that in October 1990 a further auditors’ report stated that grave and widespread irregularities continued in the BCCI’s banking, and referred also to fraudulent documentation in the bank? In addition, there is now substantial reason to believe that in January of this year a formal report was made to the Bank of England and to the relevant Government Departments that the BCCI was linked with terrorist activities. Is the Prime Minister aware that the Governor of the Bank of England told an all-party group of Members of this place last Thursday evening that he kept the right hon. Gentleman, as Chancellor of the Exchequer, fully informed of all developments concerning the BCCI? Is he aware also that the present Chancellor of the Exchequer told hon. Members last Thursday morning that until he became Chancellor he knew nothing about the BCCI–that was the responsibility of his predecessor?
The specific questions that have previously been put to the Government but not answered must now be answered by the Prime Minister. First, when did Ministers, including himself as Chancellor, first know of the very serious banking irregularities at the BCCI?
Secondly, when did Ministers, including the right hon. Gentleman as Chancellor, first know about fraud?
Thirdly, when did Ministers, including the right hon. Gentleman as Chancellor and Prime Minister, first know that the BCCI was being systematically used for the laundering of criminals’ moneys and the funding of terrorism? These are– [Hon. Members :– “That is for the inquiry”]. These are answers that the Prime Minister can give today. Will the Prime Minister now tell us whether the decision to allow the BCCI to continue to operate after the receipt of the March and October 1990 reports was taken with the knowledge and the agreement of the Government? Why was the BCCI allowed to continue in operation after the Government had evidence that the bank was involved deeply in financing terrorists? Will the right hon. Gentleman agree that it would indeed be strange if the Government were not aware of the repeated reports from Price Waterhouse of very serious and continued irregularities at BCCI, of the money-laundering cases in the United States of America and, particularly, of the information available from the security services about practices at the BCCI?
Does the Prime Minister not agree that no Government can be allowed to shift the blame on to officials, whether junior or senior? Is he aware also that neither legal nor moral obligations can be confined to the Bank of England? This is a matter of ministerial responsibility, and ultimately the responsibility of the Prime Minister himself. The small investors, the depositors and the local authorities that have lost millions of pounds have the right to full and honest answers, and they need to know which Ministers knew what, when they knew it and what action they took. They deserve those answers now.
The Prime Minister : The right hon. Gentleman is muck-racking, and he knows it.
Mr. Kinnock rose —
Mr. Speaker : Order.
Mr. Kinnock : On a point of order, Mr. Speaker.
Hon. Members : Sit down!
Mr. Speaker : Order. What is the point of order?
Mr. Kinnock : There is certainly plenty of muck about, and I suspect that a great deal of it is on the Conservative Benches. The Prime Minister must withdraw his remark. Millions of pounds have been lost by small depositors, small businesses and local authorities. We deserve better than that answer– [Interruption].
Mr. Speaker : Order. I am not responsible for the answers that are given.
The Prime Minister : No one in my Government is seeking to shift blame. We have established an inquiry to determine where the blame lies, and we shall publish that inquiry. I am surprised that the right hon. Gentleman…
Mr. Stuart Bell (Middlesbrough) : On a point of order, Mr. Speaker.
Mr. Speaker : Order. The hon. Gentleman always rises on a point of order. I shall call him later.
The Prime Minister : I am surprised that the right hon. Gentleman should again ask those questions. My right hon. Friend the Chancellor dealt with a number of them the other day, and the remainder are for the inquiry. The right hon. Gentleman asked for an inquiry, and he has got an inquiry. All documents will be available, and all officials and all Ministers will co-operate with the inquiry. Nothing will be hidden. The matters that the right hon. Gentleman raised are matters for the inquiry.
The right hon. Gentleman has twice shifted his ground in recent days – [Hon. Members :– “Answer”]. I will answer the question in my way.
Hon. Members : Did you know?
Mr. Speaker : Order. May I say to the House that there are many people outside this place who are very interested in what the Prime Minister has to say. He has a right to answer the questions put to him.
The Prime Minister : The right hon. Gentleman called for a statement in this House, and that could have only two purposes – either to secure discussion on the Floor of the House of the very sensitive operations of the security services or to prejudice the results of an independent inquiry. If it is the first, the right hon. Gentleman of all people should know, because he is a Privy Councillor, that security operations are never discussed on the Floor of the House. I find it surprising that he did not seek a briefing on Privy Council terms – something which is always available to the Leader of the Opposition. If it is the second, the right hon. Gentleman should be ashamed of himself.
I shall tell the right hon. Gentleman precisely what I did and did not know. I did not see, nor would I have been expected to see, any of the audit reports that Price Waterhouse submitted during 1990. I was informed of the suspected fraud uncovered in a section 41 report only on 28 June this year. I had no previous knowledge of that. I have established an inquiry and I have made it quite clear that it will be open. All evidence, all people – including Ministers and myself – will be answerable to that inquiry. I shall publish the inquiry, and then answer for it before this House.
Mr. Terence L. Higgins (Worthing) : Is not it worth reminding the House and the country that the BCCI was not a British bank, and that many of the problems have arisen because of the difficulties of international regulations? Have there been any international consultations on this range of issues?
The Prime Minister : It is likely that, at the conclusion of Lord Justice Bingham’s report, those matters will have to be pursued, but at this stage it would be unwise of me to pursue them.
Mr. Alex Carlile (Montgomery) : Although the appointment of Lord Justice Bingham to chair the inquiry is welcome and appropriate, will the Prime Minister confirm that he will have the power to compel witnesses to attend to give evidence, that the inquiry will include in its remit inquiring into the activities of the security services, and inquiring into whether it is appropriate for the Bank of England to approve banks registered under the toy-town banking laws of Luxembourg that guarantee secrecy to crooks and vagabonds? Will the right hon. Gentleman confirm that if Bingham concludes that, if the Government or the Bank of England has not shown a responsible duty of care to corner shopkeepers, compensation will be paid?
The Prime Minister : The hon. and learned Gentleman’s remarks about toy-town authorities in Luxembourg come ill from a party which purports to be strongly European and I suspect that they will cause strong offence in Luxembourg and possibly elsewhere.
On the hon. and learned Gentleman’s substantive point, it will not be necessary to compel people to attend the inquiry. Those who will attend are Government servants or regulators. I have given to the House a commitment that they will all attend and give evidence, that includes members of the security services, if Lord Justice Bingham requires to see them.
Sir Peter Tapsell (East Lindsey) : Is it not a fact that this House has imposed on the Bank of England a responsibility for regulating the banks, and that it is not the Government’s task to do that? If there is a fault in the system, does it not date back to the codification of the bank’s powers which was imposed by the Labour Government in the Banking Act 1979–which on Second Reading I warned would weaken the much more arbitrary powers which the Bank had held? Is it not appropriate that we should proceed via a public inquiry–a suggestion which I made a fortnight ago? Have we not just heard from the Leader of the Opposition one of the most cynical displays of political opportunism that we have seen?
The Prime Minister : I believe that each of my hon. Friend’s points is correct. It is an undeniable fact that, under the Banking Acts, the Bank of England is the regulator and is responsible for these matters. The Governor of the Bank of England has made it wholly clear that he will co-operate fully with the inquiry, and he will undoubtedly do so.
Mr. Robert Sheldon (Ashton-under-Lyne) : Like many others this weekend, I read a great deal about the BCCI’s actions and the suspicions felt about the bank long before the recent revelations. Obviously, we accept that the right hon. Gentleman, as Prime Minister and as Chancellor of the Exchequer, may not have known about definitive acts of fraud, but conversations and discussions take place all the time between the Governor of the Bank of England and the Chancellor and it would be astonishing if he did not know something about that affair. Surely the right hon. Gentleman must have been informed about part of it.
The Prime Minister : As the right hon. Gentleman knows, the audit reports submitted by Price Waterhouse suggested that there was widespread fraud, which is a substantive point. I did not see the audit reports from Price Waterhouse; nor was I informed about them. As soon as I was informed, on 28 June, we saw the Governor of the Bank of England and the action about which the House now knows was subsequently taken. At no earlier stage was I given the information that the right hon. Gentleman implies that I was given.
Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : Does my right hon. Friend accept that there should be some sympathy with the Leader of the Opposition because of the excellent situation resulting from my right hon. Friend’s G7 talks and negotiations? This whole point is meant to cloud those negotiations. Is it not odd that the party that wants fully to support the Common Market is one reason why we have problems with the BCCI? Is it not odd that the Labour party is not willing to accept a full and independent discussion and inquiry, which will come to the truth without anyone being sheltered? How else can one explain the opportunism and muck-raking involved in raising this matter at this time?
The Prime Minister : I am surprised at that, for the reasons which I set out earlier. The Leader of the Opposition wrote to me on Thursday about the benefit of setting up an inquiry without delay. For once, on this matter the right hon. Gentleman and I were in complete agreement. My right hon. Friend the Chancellor announced such an inquiry on Friday. The Leader of the Opposition then denounced it, and today we have heard what he has subsequently had to say.
Mr. Michael Foot (Blaenau Gwent) : Can the Prime Minister tell us whether his proposed Citizen’s Charter, will deal with the growing menace, freshly illustrated today, of buck-passing Ministers in bank scandals?
The Prime Minister : If the right hon. Gentleman and his party will stop devising artificial reasons for preventing us from getting on to the statement on the Citizen’s Charter, they will find out.
Mr. Patrick Cormack (Staffordshire, South) : Will Lord Justice Bingham have the authority to investigate the manner in which so many people’s misery has been shamelessly exploited for political ends?
The Prime Minister : The inquiry will be wide-ranging, but I should not imagine that Lord Justice Bingham will investigate that matter.
Mr. Merlyn Rees (Morley and Leeds, South) : Would it not be normal practice for security information linking terrorism and a banking house to be passed to the Prime Minister of the day by the security services?
The Prime Minister : As a former Home Secretary, the right hon. Gentleman knows as well as anyone in the House that I shall not answer questions in the House on security. I reiterate what I said a few moments ago – that any relevant material will be made available to Lord Justice Bingham’s inquiry, and that the outcome of that inquiry will be published.
Mr. Andrew Hargreaves (Birmingham, Hall Green) : Does my right hon. Friend agree, and will the House accept, that although the BCCI has had a suspicious reputation for many years in banking circles, it was at the prompting of the Bank of England that the Sheikh of Abu Dhabi was persuaded to mount a refinancing of the bank to lead it back to the straight and narrow, and that when that proved to have failed, and fraud was revealed, when the Bank of England considered that it might have sufficient evidence to stand up in court it acted promptly? Does my right hon. Friend agree that it is not the job of the Government or of Ministers to pre-empt the Bank of England in such matters?
The Prime Minister : That is entirely right. The moment that there was evidence of fraud, the Bank of England acted very promptly indeed, and so did the Government.
Mr. John Evans (St. Helens, North) : How will Lord Justice Bingham be able to compel foreign nationals to attend his inquiry to give evidence?
The Prime Minister : This will be an inquiry into the regulators, not into foreign nationals.
Sir Nicholas Fairbairn (Perth and Kinross) : As we are informed by the press that the shadow Chancellor of the Exchequer, the right hon. and learned Member for Monklands, East (Mr. Smith) is for ever dining or lunching in the City of London, is it not remarkable that he was not aware of the alleged – [Laughter].
Mr. Speaker : Order. Will the hon. and learned Gentleman come to his question?
Sir Nicholas Fairbairn : – crime, and that the Opposition never once raised the matter, although they say that it was so obvious?
The Prime Minister : My hon. and learned Friend makes his point pertinently in his own way. It is indeed a surprising omission, and I can confirm that, so as far as I am aware, I have received no letter from the right hon. and learned Member for Monklands, East (Mr. Smith).
Mr. Ron Leighton (Newham, North-East) : Is it not the case that none of the big City players or institutions have lost money in the debacle, because none of them has done business with the BCCI for many years, because of its unsavoury reputation? Why was that information kept within a small charmed circle and not made available to my constituents, who have lost their businesses and their savings?
Mr. Speaker : Order. I interrupt the hon. Gentleman to remind him that the statement was about the inquiry and not about the bank itself.
Mr. Leighton : Why was that information kept not only from my constituents, but, apparently, from the Prime Minister when he was Chancellor of the Exchequer?
The Prime Minister : As you, Mr. Speaker, have just said, I have no knowledge of other banks’ relationships with the BCCI. The inquiry will concern what knowledge the regulators had, when they had it and whether that knowledge was properly handled.
Mr. Andrew Rowe (Mid-Kent) : As my right hon. Friend will have gathered from a number of questions today, there has been anxiety on both sides of the House about whether the approach of 1992 and all that follows from it will strengthen or weaken the controls over banks registered in places such as Luxembourg. Will the inquiry examine the impact that the European Community will have on such regulations, and can he assure us that it will strengthen them?
The Prime Minister : There are generally very high standards of regulation in Europe. Clearly we shall have to take account of them when we study the report – but these are matters that will need to be considered afresh in the light of the sophisticated but serious fraud that has been perpetrated by the BCCI.
Although people may regard it as entirely right, as I do, that the inquiry should take place, we should never overlook the fact that this was a sophisticated and detailed fraud.
Ms. Marjorie Mowlam (Redcar) : Will the Prime Minister confirm that the results of the inquiry will be published before the next election?
The Prime Minister : I shall publish the results of the inquiry as soon as Lord Justice Bingham presents them to me. I hope that he will be precipitate and that he will speed ahead with his inquiry. We shall put no impediments in his way.
Mr. Ian Bruce (South Dorset) : Will Lord Bingham be able to look into the way in which it appears that the BCCI has been able to do so much business with local councils? Will he be able to call a senior Labour councillor from Bradford, who was apparently selling for the organisation for a number of years?
The Prime Minister : I can answer for Government officials, for the regulators and for the Bank of England. They will all be available; others must answer for themselves.
Several Hon. Members rose —
Mr. Speaker : Order. I remind the House that this is a private notice question. Furthermore, there is a debate on this very matter later today. I shall call for three more from each side and then move on. We have two other statements today as well. I call Mr. Bell first.
Mr. Bell : The House will accept that the Prime Minister did not see the auditors’ reports by Price Waterhouse. May we take it that the terms of reference of the inquiry will be as we have heard them today; and will Lord Justice Bingham be able to look at the competence of a whole series of Ministers of the Crown, including the Secretary of State for Employment, who sent the letter to the wrong address, the former Secretary of State for Trade and Industry, who did not get the letter, the former Chancellor of the Exchequer, who claimed that he had no knowledge of it, and the present Secretary of State for Trade and Industry, who also claims that he had no knowledge of it? Does not this go to the heart of Cabinet government and responsibility to the House?
The Prime Minister : I repeat that this was a serious fraud. The letter to which the hon. Gentleman referred contained no information previously unknown to the regulator, the Bank of England. I have already answered the substantive parts of the hon. Gentleman’s question several times, but I reiterate that it is clear from the terms of reference that Lord Justice Bingham will consider whether the action taken by the United Kingdom authorities was appropriate and timely.
Mr. Alistair Burt (Bury, North) : Will the inquiry have powers to concern itself with the knowledge held by a certain number of investment brokers and with their relationship to the BCCI? In particular, will it be able to consider the amount of commission that they were paid by the BCCI to ensnare certain unwise local authorities–they never investigated the position–into investing in the bank?
The Prime Minister : I think that the Government may wish to consider the implications of the point that my hon. Friend raises, but I am not sure whether it entirely falls within the remit of Lord Justice Bingham’s inquiry.
Mr. Jim Sillars (Glasgow, Govan) : Is the Prime Minister aware that there is a significant difference between the public publication of the outcome of the inquiry and the public examination under oath of witnesses before the inquiry? Why have we not had the latter?
The Prime Minister : For the very practical reason that I do not want to take any action that may prejudice criminal investigations by the Serious Fraud Office–there is a danger that that would happen. Given the seriousness of the fraud, I am sure that no one would want that.
Mr. Jack Ashley (Stoke-on-Trent, South) : The Prime Minister said a moment ago that all relevant information would be made available to the inquiry. Did he know that the United States authorities asked for information from the Bank of England some two years ago and that the bank replied that it could not disclose confidential information because of the Banking Act 1987? Did the Prime Minister agree with that judgment? If he did, and if that excuse is used at the special inquiry, does not that mean that the truth will never be revealed?
The Prime Minister : I have made it perfectly clear, and I reiterate to the right hon. Gentleman, that all the information required by Lord Justice Bingham will be made available to him. I understand that the American authorities are now satisfied with the assistance and information that they have had from us.
Several Hon. Members rose–
Mr. Speaker : Order. I called two Opposition Members, and I shall now balance that.
Mr. Charles Wardle (Bexhill and Battle) : Does my right hon. Friend accept that the City of London understands the need for an inquiry and approves of it, but that it does not understand and will not condone the specious private notice question put down by the Leader of the Opposition?
The Prime Minister : I believe that the City of London will make up its own mind about that matter, and I suspect that it will agree with my hon. Friend.
Sir Peter Hordern (Horsham) : Will Lord Justice Bingham be empowered to investigate international bank regulation as well as our bank regulators?
The Prime Minister : I think that he may well make recommendations, since the scope of his inquiry may lead him to believe that it would be appropriate for him to do so. Where he does so we shall of course consider those and, if appropriate, take them up with other bodies as well.
Several Hon. Members rose–
Mr. Max Madden (Bradford, West) : On a point of order, Mr. Speaker.
Mr. Speaker : Not now. I again remind the House that we are to have a debate on this matter later.