$300m Singapore rescue plan
THE BARINGS COLLAPSE
Thursday 02 March 1995
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.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...