Leading Article: Tales of neglect and incompetence

The barrow boys were giggling in the wine bars this week. Visitors to the City report that - among dealers - natural born killers Micky and Mallory have been replaced by Nicky and Lisa as iconic rebels. There is elation, apparently, that the lad from the council house in Watford put one over on the City gents.

For others the antics of the Leesons are no joke. There are real casualties of the Barings collapse - people who may have lost a great deal of money and will not get it back. The losers obviously want to know just how it was that the management at Barings allowed the Leeson affair to develop so far and so fast. Gradually we are beginning to find out.

It now looks as though Leeson's "exposure" (the amount of money he risked) was built up over several weeks. Indeed it seems that he asked for substantial amounts to cover his deals, and was given them. For some time before last weekend's collapse the scale of Leeson's dealings had been open gossip in Asia - and rumours had percolated through to London. As reported yesterday, Barings in London had received several calls about the Tokyo futures contracts - in which Leeson was involved - up to a fortnight before disaster struck. Nor was it just his trading performance that might have given cause for concern - his personal behaviour had also been becoming steadily more erratic.

But what responsibility have his bosses accepted for what he did? Initially they painted a picture of themselves as helpless victims of a berserk trader. It had all happened so quickly and they had been kept in the dark - not anybody's fault, old boy, just one of those things. This was then followed with a conspiracy theory. Chairman Peter Baring told the Financial Times that Leeson might have acted in concert with a shadowy individual or organisation in order deliberately to bring down the bank. Perhaps he had something like Spectre or Smersh in mind.

Neither the runaway train nor the James Bond theories are standing the test of time. What is emerging looks instead like a tale of neglect and incompetence, quite possibly with an element of fraud. Barings knew that in Nick Leeson they had a star. He made them vast sums of money. So it seems that warning signs were ignored, supervision was neglected, rudimentary questions were not asked.

Such recklessness is not considered characteristic of the modern merchant bank, but there have been too many examples of it for comfort. Not long ago in New York, an out-of-control trader at Kidder Peabody wreaked financial havoc on its parent company, General Electric, one of America's most admired industrial groups. At Barings, the toffs found themselves in a world where telephone numbers were being made by Del Boy and his mates. They gave Del his head.

Now the fruits of this psychology are to be investigated by those who have indirectly presided over it. The Board of Banking Supervision inquiry into the Barings collapse is to be chaired by Eddie George, Governor of the Bank of England. But if there was a regulatory failure at the heart of the collapse, it was the Bank that was guilty. The composition of the board is also open to criticism. Whatever the virtues of the individuals involved, it is insufficiently broadly based. Which is why the call for an independent inquiry into Barings is worthy of support. Such an inquiry would reassure the public that the toughest questions were being asked. Toughness is essential because until everybody involved faces up squarely to their responsibilities, the danger of another disaster will be greater than necessary.