Not only does a close reading of the text show a number of instances where the Bank fell down on the job, it also implies through its recommendations for action that this was more than a matter of a few lone mistakes by Christopher Thompson, the 51-year-old Bank of England middle manager who is getting the blame along with Nick Leeson and the Barings management. The extent of the proposed changes in banking supervision techniques is in itself an indictment of the way the Bank of England approached the job of monitoring a global securities and banking business.
Reading between the lines, the Board of Banking Supervision's independent members - who were responsible for the section on supervision of Barings - found that the Bank of England was simply not up to supervising these strange animals, because it did not understand them. When it was faced with making decisions, the Bank made serious mistakes.
The Bank seized on the report's conclusion that the board saw no need for any fundamental change in the UK regulatory framework, but instead required improvements in existing arrangements, as evidence that nothing terribly serious or fundamental had been said about its own organisation. It would say that, wouldn't it? Much the same response was given to the report on BCCI by Lord Justice Bingham.
In the past couple of years, the political winds have changed. The Treasury believes that the nature of global finance, with its explosive cocktails of banking and securities dealing in the same organisations, has left the Bank of England far behind. Ideas first mooted in Whitehall, when the 1987 Banking Act was drafted, of creating a separate banking supervision organisation are being taken seriously again.
Last time round such radical thoughts were dropped after the Bank's lobbying machine went into overdrive. Modern versions of the same ideas see the new supervision organisation embracing securities regulation as well, to cope with the hybrid firms now running financial markets.
The Chancellor will almost certainly shy away from any substantial changes to regulation and supervision, at least before the election, but Labour has already come off the fence and said it would like to break up the Bank of England. Barings has put that excellent idea firmly on the agenda, not before time.
The Bank may also be forced on the defensive over the issue of accountability. The generals at the Bank have allowed a warrant officer to shoot himself - or perhaps they handed him the revolver and a bottle of Scotch. But there is a striking contrast between the ladder of accountability traced at Barings, right up to board level, and the failure to explore in detail similar issues of responsibility - rather than blame - at the Bank.
In 1993, Mr Thompson made an "error of judgement" in informally allowing Barings to raise its exposure on the Osaka Securities Exchange above the normal 25 per cent limit of its capital, which Barings took to apply also to its exposure to the Singapore exchange.
The report raises the intriguing question of whether this concession was a contributory factor to the Barings collapse. If the 25 per cent limit had been in place, Mr Leeson's exploding positions would have had to be curtailed or might even have been uncovered earlier. They would certainly have caused Mr Leeson problems in continuing his deception from the end of January 1995 onwards, the most critical period.
The report offers some theories about what might have happened, then tantalisingly backs away from drawing any conclusions. But it does point out that the concession was eventually reversed, in a letter from Mr Thompson to Barings on 1 February 1995.
That was nearly four weeks before the crash, at a time when losses were mounting fast but before the final horrific escalation in February. The Bank seems to believe that Mr Thompson acted alone in giving the concession, without consultation, apart from talking to the policy group last year about what the report calls a "narrow issue" of how Barings exposures were to be reported. But the reversal of the concession was, in contrast, a result of a decision in January 1995 by the top level Supervision and Surveillance Policy Group of the Bank.
The implication is that this crucial issue of exposure limits was aired higher up the chain of the Bank's command weeks before Barings went to the wall. So who else knew, and where was the urgency about dealing with it? The policy group certainly must have known something in the final stages.
The Bank is good at internal damage limitation. In the wake of the Johnson Matthey Bankers collapse in 1984 there was one senior sideways move and after BCCI in 1991 one discreet early retirement, in both cases long after the post mortems had been published and assurances had been given that the Bank felt no need for heads to roll.
Senior executives at the Bank, including Brian Quinn - an executive director who in one job or another has been associated with supervision since the early 1980s - are gaining a Teflon reputation. The Bank must undertake a much more fundamental shake-up of supervision this time if it is to re-establish any credibility at all.
But, of course, the real villains of this report, apart from Nick Leeson himself, are the Barings managers who let it happen under their noses. It was a free-wheeling, adventurous and risk-taking organisation whose incompetence defies belief. In spite of all the details in the report of who failed to say what and to whom, it leaves the reader as incredulous that it could happen as the senior bankers who gathered that fateful weekend in February when a rescue was attempted and failed. There was unauthorised trading, negligence, failure to spot clues in front of their eyes, inability to act on specific warnings and, above all, the extraordinary fact that pounds 800m was committed to speculation without anybody asking serious questions.
Since the collapse, every securities and banking firm in the world has been assuring anyone who cares to listen that its controls are as near perfect as human hands can make them. The shock has certainly made senior managers look again at their systems, in big organisations as well as small ones.
The risk in heaping scorn on Barings and projecting it as uniquely incompetent, an exceptionally bad bank that became the victim of a rogue trader, is that complacency will gradually reassert itself. There have been four banking disasters in Britain in the past two decades, beginning with the fringe banks in 1974. With banking supervisors always running a poor second in the race to catch rogues and incompetents, it is hard to be confident that it will not happen again if the present system of supervision is allowed to continue.
Edited by Peter RodgersReuse content