City sources say that Mr Heath, who resigned last March as chairman of Baring Securities, has already raised pounds 200m - a considerable feat for a new venture. 'This could just be the start,' one source said, adding that the money appears to have been pledged by financial institutions, with no single shareholder owning more than 30 per cent.
Mr Heath confirmed plans to set up a new bank but was reluctant to discuss details. He also played down the scale of the new enterprise. 'I am setting up a small operation which will have a heavy emphasis on fund management and capital markets. It will specialise in emerging markets. It would be totally inappropriate for me to say anything further.'
Mr Heath achieved notoriety after it emerged that he had earned pounds 2.5m in 1986. He was largely responsible for transforming Baring Securities from a small player into a leading name in Japan and other Far Eastern markets.
However, Baring Securities, a subsidiary of the Barings merchant bank, began to lose money in the early 1990s. This prompted closer questioning of a department once run by Mr Heath with near autonomy.
He finally left the bank last March after a disagreement over how to take the operation forward, arguing at one point that it ought to be enlarged, possibly by allowing another bank to take an equity stake.
City sources expect Mr Heath to poach a number of key personnel from his previous employers. A Barings spokesman said there had been no approaches as far as he knew.
He said Barings was still friendly with its former employee, but that Mr Heath had 'played his cards close to his chest' about the new operation. He would not comment on stories that Mr Heath had signed a non-competition clause that expired at the end of last year.
One specialist in emerging markets said he was not surprised by Mr Heath's apparent success in raising so much money: 'He has a good track record and a large following.'
The new operation is expected to have offices around the world, with a key location being Hong Kong.