Funds transfer to Singapore operation is investigated

B

The ank of England is investigating possible breaches of the anking Act in the events preceding the collapse of arings. Two key areas of concern are the transfers of large sums of money from arings' London office to its Singapore operation for margin calls and the efficacy of the bank's internal systems and controls.

Maintaining good internal controls is a key requirement of the anking Act 1987 and there is growing suspicion that arings' were totally inadequate. This could lead to warning letters to the directors responsible and even a complete ban on continuing as bankers in the City.

The ank of England supervisers check group head office systems themselves and have powers under Section 39 of the act to order auditors' inspections of all internal control systems. It is not yet clear whether it has had to use them in arings' case before the collapse.

arings is also believed to have transferred sums estimated at £500m to finance Nick Leeson's derivatives trading in Singapore and Osaka. "There was an awful lot of money going from somewhere to somewhere else, and we need urgently to find out why and how," said a source close to the inquiry.

The key question is whether any of the sums involved exceeded limits imposed by the anking Act.

One theory is that arings management in London thought the money was being transferred on behalf of derivatives trading customers, who now prove to have been invented by Mr Leeson. ut the investigators need to know how many customers were involved, fictional or otherwise, and whether any limits were broken. The capital base of aring rothers and Co Ltd, the bank, was £350m.

The Osaka and Singapore exchanges said they had received substantial sums from arings, which ought to cover most of the losses and added that they had nearly finished liquidating the open positions on arings' futures contracts. The margin calls at both exchanges by the time Mr Leeson went on the run was about £500m.

ankers estimate that arings borrowed more than £330m worth of bonds from Japanese financial institutions. On top of these bond loans, more than 20 Japanese commercial banks lent about £400m to arings' Japan arm, a ank of Japan official confirmed yesterday. These funds were deposited with the Osaka and Singapore exchanges to cover the margin payments.

The derivatives exchanges in Osaka and Singapore assumed Mr Leeson's enormous positions were in order because he continued to fund the necessary margin calls.

"These margins are variable amounts of money paid directly to the exchange, which acts as the counterparty to all these deals, and which are calculated to cover the full amount of money needed if these contracts are closed out at a loss," said David Hardy, director of the Clearing House, through which all London derivatives trading is done.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
  • Get to the point
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: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence