Barings knew of Leeson account


Financial Editor

Senior Barings executives were alerted to Nick Leeson's secret derivatives trading account more than six weeks before the merchant bank collapsed, according to documentary evidence acquired by Bank of England investigators. The Singapore exchange, Simex, wrote on 11 January to Barings' top management in Singapore questioning the status and contents of account 88888.

This was the account, based on a fictitious customer, allegedly used by Nick Leeson, the Singapore-based Barings trader, to conduct the massive speculation that brought the bank down in late February under nearly pounds 900m of losses.

Despite this query, the existence of account 88888 was not discussed at meetings in London of Barings' risk control unit, the Asset and Liability Committee, in January and February.

Bank of England investigators, who meet tomorrow to finalise the report with a view to handing it to the Treasury next week, have focused on this apparent lack of internal communication during the vital period between 11 January and the first admission to the Bank of England on 24 February of the gravity of the situation. Top executives in London have denied all knowledge of this account.

Evidence presented to the inquiry also shows that Barings was already technically bankrupt by the end of 1994. Nick Leeson, who is in prison in Germany awaiting decision on an extradition request from Singapore, had allegedly been writing options to raise cash for his derivatives speculation. The mark to market loss on these options by late 1994 was already $400m.

The Bank of England is also expected to report that Nick Leeson had been trading on this secret account 88888 since as far back as mid-1992.

The Simex letter questioning the status of this account was directed to Simon Jones, the now-dismissed chief operating officer for Asia for Baring Securities. Simex wanted confirmation that this was a customer account, and to know why there was an $80m shortfall between the margins posted on behalf of customer 88888 and margins actually held in the account. Mr Jones's reply to Simex of 25 January sought to allay concerns, explaining that the shortfall could be accounted for by adding the house trading account into the calculation.

Nick Leeson allegedly acted as his own customer on account 88888, which was entirely separate from the monitoring of Barings' house trading positions. The broking fees and commissions earned on these allegedly fictitious customer trades were booked to Barings. In 1994 Barings' futures operations benefited to the tune of pounds 25m from paper revenues apparently declared by Nick Leeson through the secret account. A key weakness identified by the Bank of England investigators is that Barings' securities supervision in London did not distinguish between the numerous customer trades in Singapore. The inquiry also learned that the Contac software system feeding trading information daily from Singapore to London had been doctored to drop automatically any reference to account 88888.

More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete tomorrow
Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
peopleBroadcaster has a new role bringing 'the big stories that matter' to US
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Life and Style
Moves to regulate e-cigarettes and similar products as medicines come amid increasing evidence of their effectiveness
healthHuge anti-smoking campaign kicks off on Wednesday
Life and Style
fashionEveryone, apparently
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
Arts and Entertainment
Shia LaBeouf is one of Brad Pitt's favourite actors in the world ever, apparently
filmsAn 'eccentric' choice, certainly
Life and Style
An Internet security expert has warned that voice recognition technology needs to be more secure
techExperts warn hackers could control our homes or spend our money simply by speaking
peopleBenjamin Netanyahu trolled by group promoting two-state solution
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style