The Treasury select committee reserved its most detailed and pungent criticisms for the Bank of England's performance in overseeing Barings, and it warned that unless the Bank changed its "old culture" it may have to lose responsibility for banking supervision.
But it also said the SFA, the regulator responsible for securities and derivatives trading, visited the bank in January 1995, just a few weeks before the collapse at the end of February.
The committee said: "Although our inquiry has not revealed any shortcomings of the SFA in respect of the detection of malpractice at Barings, we note with concern that a visit to Barings was conducted by the SFA in January 1995 and that the lack of internal controls and management weaknesses went undetected."
The MPs on the committee, including Tim Yeo and Quentin Davies, said that many of the criticisms levelled at the regulators could also be made of Coopers & Lybrand. They said that the firm failed over several years to pick up the serious lack of controls which helped Nick Leeson, the rogue trader at the centre of the scandal, to escape detection for so long.
The committee was "concerned that one of the key checks, that of the auditors, upon which shareholders should be able to rely, failed over a number of years to reveal weak internal controls and resulting unauthorised behaviour".
The committee criticised the Bank of England for using Coopers to carry out a Section 39 inquiry into Barings under the Banking Act, saying that such inquiries should be done by firms not tied up with the institution being investigated.
But the British Bankers' Association rejected this recommendation as "expensive and of doubtful value".
The report follows a series of public hearings at which senior figures, including Peter Baring, the chairman, and Andrew Tuckey, his deputy, were given the rough edge of the MPs' tongues. But the report said almost nothing about the personalities involved or about individual responsibility.
It did, however, criticise the Bank of England for only grudgingly helping the investigation by the Singapore authorities, and it urged improved international coordination and the removal of obstacles to sharing information.
The committee said: "The Bank needs to demonstrate that it is able to separate its supervisory activities from its other functions. Otherwise it may be that in order to bring about the necessary cultural change banking supervision will have to be taken away from the Bank of England."
The MPs were "concerned that, as a former bank itself and as a cheerleader for the City, the Bank may be in a position of `regulatory capture' ".
The proximity of the Bank to the banking sector could act as a double- edged sword. The report said: "While it is useful to the Bank to have intimate knowledge of the banking sector [although not intimate enough to have picked up on the rumours circulating before the collapse of Barings], there is a risk that the Bank could avoid introducing useful supervisory measures which would displease the banks or might be perceived to have competitiveness implications."
Comment, page 15