The collapse of Barings resulted from "severe and dramatic" problems in control within the bank's Singapore branch, a senior Bank of England official said yesterday.
The statement, the first public indication from the Bank of where it believes responsibility lies, is said to be part of an effort to fend off criticism that the Bank itself was negligent.
Brian Quinn, head of banking supervision at the Bank of England, was giving testimony to a committee of the European Parliament. "The preliminary indications are that there was a rather severe and dramatic breakdown of central systems as they related to the subsidiary company in Singapore," Mr Quinn said.
He confirmed that the main part of the inquiry into the affair - regarding what, if any, changes needed to be made to regulatory and supervisory systems - would be led by independent experts. The other part - seeking to establish what happened and how - is being led by a six-member team, including three ex officio representatives of the Bank of England.
Mr Quinn was appearing before the European Parliament's economic and monetary affairs committee, which is holding an investigation into derivatives.
Alan Donnelly, Labour MEP for Tyne and Wear and Socialist Group spokesman on the committee, said existing EU legislation should be changed to tighten companies' internal procedures.