and JOHN EISENHAMMER
The Bank of England came under renewed attack yesterday over its handling of the Barings affair from the influential Treasury Select Committee.
Highlighting concerns about weaknesses exposed in the Bank's supervision, the committee said it intended to re-open its Barings inquiry in the new year. This is expected to involve calling some of the most senior former Barings' executives to give evidence.
Sir Thomas Arnold, the Conservative chairman of the select committee, said the investigation would focus on the "the apparent discrepancy" between the findings of the Singapore investigation into Barings and the one conducted by the Bank of England's Board of Banking Supervision.
In a hard-hitting statement to Eddie George, Governor of the Bank of England, who was giving evidence to the committee on the Budget, Sir Thomas said: "We are concerned that the Bank has allowed some institutions to operate within an 'informal' control system and taken at face value management platitudes about the sources of their profit without the rigorous scrutiny we believe necessary."
He reiterated the committee's view that the improvement it wished to see in banking supervision might require stripping the Bank of England of its supervisory responsibilities and the establishment of "a new, separate body with enhanced powers and a more thorough approach to its work."
Eddie George said he now regretted using the word "witchhunt" in the previous hearing over the summer. He said the Bank would be producing a report to the Board of Banking Supervision before the end of the year outlining the actions already taken to implement the 17 recommendations set out in the report. Arthur Andersen, the management consultant, has been called in by the Bank to suggest ways of improving its supervisory systems.
Sir Thomas expressed the committee's concern that "while the Board of Banking Supervision report into the collapse of Barings was content to criticise senior Barings managers for failing to establish effective controls, the report of the Singapore authorities appears to go much further and suggests certain managers may have covered up for Mr Leeson".
The Singapore report is particularly critical of the role played by Peter Norris, the former head of Barings investment banking, accusing him of covering up vital warning signs that might have prevented the collapse of the bank under nearly pounds 900m of Nick Leeson's derivatives trading losses.
Sir Thomas said this was "a far cry from blaming the debacle on the activities of one sole rogue trader." Some 23 former Barings executives are currently under investigation by the Securities and Futures Authority, the City watchdog.
Peter Baring, former chairman, Andrew Tuckey, former deputy chairman who is still working at Barings as a consultant, and Mr Norris are expected to head the list of those called before the committee. This would be the first time they have given evidence in public about the crash.
But legal sources last night cast doubt on whether some of the executives would appear voluntarily. The committee would then have to ask the House to summon the executives to appear before it.
Early last month, Sir Thomas called for a Parliamentary debate on the Barings crash and the Bank of England's role. It appears that the Government has not found time for the debate, and this has persuaded the Treasury committee to intensify its inquiry.
Sir Thomas also drew attention to the fact that the Singapore report had, in a venomous six-page appendix, complained that its investigators in London had faced a lack of co-operation, and in some cases deliberate obstruction, by the Bank of England.Reuse content