Baring denies incompetence and negligence

Peter Baring, the disgraced ex-chairman of the collapsed merchant bank yesterday rejected repeated suggestions by MPs of incompetence and negligence, saying he was the unwitting victim of a deception that fooled everyone. "I do not think we were greedy, stupid or idle," Mr Baring retorted under a barrage of questions at the Treasury Committee.

Speaking with lengthy pauses, at times refusing to comment on MPs' remarks, Mr Baring said of himself and the bank's very top management: "We felt we were on our toes and the Bank of England felt the same. But we were deceived."

Mr Baring, with Andrew Tuckey, former deputy chairman of Baring, were giving the first public evidence on the crash of Britain's oldest merchant bank under nearly pounds 900m of unauthorised derivative losses in February last year.

Nervously twiddling his thumbs during the two-hour grilling, Mr Baring rejected the notion that he held the main responsibility for failing to spot the actions of Nick Leeson, the Singapore trader. "I know who I think were responsible. But I am not prepared to apportion responsibility for the insolvency. I share it with colleagues more directly involved in the management of Leeson but it is not appropriate for me to allocate responsibility between them."

Confronted by an MP with the Singapore investigators' judgement that top management was gullible and naive, Mr Baring retorted: "I think that is an absurd suggestion". He confirmed he received a total remuneration of pounds 1.25m in 1993, and Mr Tuckey pounds 1.95m, as Leeson's fraudulent trading grew undetected. Asked whether he felt a moral responsiblity to pay some back to investors who lost in the collapse Mr Baring refused to comment.

Repeatedly stressing that they were hoodwinked, Mr Baring insisted the sort of profits Leeson claimed to be delivering were credible. "We had direct experience of a number of operations in the Baring group where substantial profits emerged quickly. What we believed was that this business could not go on for ever but it was not inherently implausible."

Questioned about the massive transfers of funds from London to finance Leeson's trades, $750m (pounds 500m) in February alone, Mr Baring and Mr Tuckey said they had no detailed knowledge of the flow of money.

"The exact numbers were not made available to us. No, I did not seek to find out what the numbers were," Mr Tuckey said. Mr Baring said he was not on that management committee. "I do know who is responsible for the loss but I won't comment on it."

Both men said it was normal for large sums to be used for the sort of low-risk business that Leeson was meant to have been carrying out.

"We did ask the relevant questions. We asked them repeatedly. It never occurred to us that the profit flow was spurious, it was not implausible," Mr Baring said.

"On the face of it there was no reason to doubt Leeson's reporting ... I believe my eye was on the ball."

Mr Baring said there was no house rule that the back office, which did the accounting, should be separated from the front office, which carried out the trading, because it is "something so obvious you don't even think of saying it. It is like telling a child not to walk in the middle of the road". However, the Bank of England and Singapore inspectors identified the confusion of back and front office roles - Leeson had control of both - as the fatal flaw in Barings' weak controls.

Asked why this had been allowed to happen in Singapore and not been corrected, Mr Baring said : "There were people on the ground in Singapore in a position to observe that, and people elsewhere who should have known."

At the beginning of the hearing Mr Baring expressed deep regret for the collapse of the bank that bore his family name: "It was the last thing I expected. It was absolutely inconceivable. I was absolutely amazed."

Mr Baring and Mr Tuckey were earlier this year cleared of direct responsibility for the Baring's fiasco by the Securities and Futures Authority, but the City watchdog made it clear that it was unhappy with the way this decision was seen.

Mr Baring has retired from business life while Mr Tuckey continues as a senior consultant for Barings under its new Dutch owners ING.

Because the committee hearing lasted longer than expected, Peter Norris, the former chief executive of Barings who was recently banned from working in the City for three years and fined pounds 10,000 by the regulator, and Geoffrey Barnett, former chief operating officer who was cleared by the regulator, were asked to return to give their evidence at a later date.