George faces a grilling
Eddie George, Governor of the Bank of England, will be accused today of complacency over the Barings collapse when he faces what promises to be a gruelling session of questions from MPs on the Treasury and Civil Service Select Committee.
At the same time, pressure is growing on Barings' auditors, Coopers & Lybrand, to answer questions about its role in the affair. Although the accountancy firm had not signed off Barings' 1994 accounts at the time the bank collapsed, a set of results had been prepared for the board to consider.
Ernst & Young, the Administrator, has said it is eager to reclaim some of Barings' £700m losses through litigation against as yet un-named parties. They are known to be examining Coopers' performance closely.
Today's meeting of the Treasury committee, chaired by Sir Thomas Arnold, the Tory MP, is expected to focus on the issue of whether the collapse of Barings could have been foreseen. Members of the committee have been circulated with copies of confidential investigators' reports which detail a catalogue of errors and omissions at Barings as senior executives failed to take action to stop Nick Leeson's disastrous derivatives trading. The documents, revealed in the Independent yesterday, include reports prepared by Ernst & Young and internal Barings documents. They have been circulated by Brian Sedgemore, the Labour MP for Hackney and Shoreditch.
They show that Barings advanced £760m, more than twice the bank's capital, to the Singapore office to support Mr Leeson's derivatives trading.
The MPs will want to know if the Bank of England knew about the huge transfers of cash, and if so why it did not take action over the mounting losses at an earlier stage. Today's session is part of the select committee's continuing investigation into the way high-risk derivatives trading is supervised both at home and abroad.
Diane Abbott, Labour MP for Hackney North and Stoke Newington, said: "After the collapse, Mr George's line was that a single rogue trader was responsible, nobody else. It's obvious now that was rubbish. Many at Barings knew of his activities months before the collapse.
"Mr George has been quoted extensively as saying the Bank of England has looked into derivatives. He said there was no problem and that the people involved were all experienced. I will be accusing him of complacency."
MPs will also want to know why the Bank of England has put back the publication of its reports into the collapse of the bank, now expected in late May. Mike O'Brien, Labour MP for Warwickshire North, said: "We will want to know why it's taking four months to deliver a report. There is a need to speed up the inquiry into Barings to get a report in reasonable time."
Mr George is expected to try to avoid answering detailed questions on Barings, argung that MPs should wait until after the Bank of England has completed its investigations.
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