Bank ready for Barings attack from Singapore

Leeson affair: Authorities expected to criticise lack of London supervision in report on pounds 860m crash

STEPHEN VINES

Singapore

and JOHN EISENHAMMER

London

The Bank of England was bracing itself last night for a barrage of criticism from Singapore, which today publishes its version of the destruction of Barings. Eddie George, the Governor of the Bank of England, will not be available in London to respond to the Singapore report's criticism as he is currently on a goodwill tour of the main Asian financial centres. Singapore is not on the itinerary.

The eight-month investigation into the bankrupting of the merchant bank under pounds 860m of derivatives losses has seen mounting diplomatic tension between the Singapore authorities and the Bank of England over where the blame lies for failures in regulation and supervision.

From the start of investigations into the Barings collapse, the British and Singaporean regulatory authorities treated each other with mutual suspicion. Bank of England investigators complained that that they could only present an incomplete picture because they were denied access to documents and evidence in Singapore, where Nick Leeson, the former Barings trader, carried out his ruinous dealings.

The Singapore International Monetary Exchange (Simex) said yesterday that its disciplinary committee had imposed a fine of Singapore $6.95m (pounds 3.15m) on Barings Futures (Singapore), the local Barings office where Nick Leeson was the senior derivatives trader. Barings collapsed at the end of February.

In June the hearing committee of Simex's board found the British investment bank was guilty of: accepting orders without causing them to be executed on the exchange; breaching its fiduciary duties by permitting the creation of false records in relation to the prices recorded for the position of two accounts; supplying false information to the exchange about the position in its long trades and for dishonest conduct in relation to fictitious trades and entries recorded.

Singaporean officials had been saying they were worried about releasing their inspector's report, which was completed over a month ago, because of fears that it would prejudice their attempts to have Mr Leeson extradited from Germany and a forthcoming trial in Singapore on fraud and other charges.

There is also the possibility that other Barings executives based in Singapore may be held to account for breaches of the law. The Singapore authorities have been successful in their extradition application, but Mr Leeson's lawyers are appealing, which means he may remain in his Frankfurt jail, where he has received regular visits from his wife Lisa, for several months more. Mr Leeson has sold his version of the story for pounds 450,000 to publisher, Little Brown.

The build-up to the long-awaited publication of the Singapore report by the Finance Ministry, some three months after the Bank of England's account, has been punctuated by insiders' suggestions it will contain savage criticism of Barings' management.

It is not clear however, whether fears of prejudicing pending legal action will mean that parts of the report remain confidential. Although there is little hope it will shed much light on the activities of the state's regulatory authorities, the inspectors have managed to put together a fuller picture of Mr Leeson's activities than was offered in the Bank of England report.

The Singapore authorities are anxious to avoid the Barings fiasco tainting the reputation of the local futures exchange, which has been aggressively built up in recent years.

The British report said the Barings collapse was almost entirely the fault of Mr Leeson and his senior managers, allowing the Bank of England to come out of the affair with only light bruises. Singaporean officials have privately been far more critical in past months about the Bank's supervisory activities, and its failure to be alarmed at the hundreds of millions being sent out of London earlier this year to fund Mr Leeson's speculation.

Since the collapse, the Singaporean authorities have only held one press conference to publicise their view of events. The policy of official silence will partially continue tomorrow as there is no plan to discuss the report which will be published after the stock market closes in the afternoon. There will, however, be a Ministry of Finance press statement accompanying publication of the report.

Diary, page 22