$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
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project