$300m Singapore rescue plan

THE BARINGS COLLAPSE

BY JOHN EISENHAMMER

and STEVE VINES

A US$300m rescue of some financial institutions hit by the Baring collapse was launched yesterday in Singapore.

The Singapore Finance Minister, Richard Hu, said a special $300m credit fund, drawn from local financial institutions, had been set up. But he hoped this would not need to be drawn on, as the Singapore International Monetary Exchange is believed to have sufficent margin deposits to offset Baring Futures Singapore's unrealised losses.

But Barings' losses widened further yesterday as Tokyo shares dropped again. Uncertainty about potential further losses will continue as long as any contracts remain open. If the entire portfolio remains open, each 1 per cent fall in the Nikkei index will raise losses by an estimated $70m.

Exchange authorities in Japan and Singapore are racing to close down the derivative positions left behind by the fugitive Barings trader, Nick Leeson. To end this haemorrhage, banks acting on behalf of the exchanges in Osaka and Singapore moved yesterday to dispose of as many of these open futures contracts as possible. Unconfimred reports said that Daiwa, acting on behalf the Osaka exchange, had closed out half of Barings' 16,000 contracts.

The Nikkei 225 index, on which Mr Leeson's derivative instruments were based, dropped to its lowest level since December 1993 yesterday.

Ending the uncertainty over further losses by closing down the contracts was seen as the key element in clearing the path of administrators, who were last night continuing urgent negotiations on several fronts with British and foreign banks interested in buying parts of Barings.

The 38 corporate members of the Singapore International Monetary Exchange (Simex) expected to be called on to raise a special levy to settle outstanding debts left in the wake of the Barings collapse. Simex officials refused to say how much money will be needed, but futures trading companies believe they could be asked for up to US$5m each.

This is an unwelcome burden but relatively modest in comparison with Singapore's share of the total losses incurred by Barings, which have broken through $1bn. This assumes that the loss is more or less equally divided between Singapore and Osaka, the two markets in which the fatal futures contracts and options were traded.

Simex is unhappy with talk of a bail-out but there is no other way to describe the money required to keep the exchange on a firm financial footing once the Baring debris settles.

Simex has contingency funds but they will not be adequate to cover this collapse.

All corporate members of Simex are required to leave a $250,000 security deposit with the exchange. There is also a compensation fund, believed to contain some $50m, derived from a levy on member's profits.

However the exchange is also said to be holding up to $550m in margin deposits advanced by Barings on the contracts that turned sour.

The list of members is largely blue-chip, including local subsidiaries of NM Rothschild & Sons and HSBC Holdings, from Britain; Chase Manhattan, Citicorp, Merrill Lynch, Shearson Lemahn Brothers from the United States, and main Japanese finance houses including Nomura and Daiwa.

The Singapore authorities say they plan to toughen supervision in the light of the Barings debacle. They say they were never told of any problems with Mr Leeson's positions because he was meeting his margin calls until Thursday last week, when he disappeared.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific