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Norris: `Barings resembled a Mad Hatter's tea party'

Peter Norris, the disgraced former head of investment banking at Baring's, yesterday admitted that none of the bank's main board members, or those on its securities subsidiary at the time, had any knowledge of the workings of derivatives, the financial instrument that brought about the merchant bank's collapse.

He admitted before MPs that the atmosphere within Baring's in relation to the activities of rogue trader Nick Leeson most closely resembled ``a Mad Hatter's tea party''.

"I offer the phrase in an attempt to find an analogy of how it feels, with hindsight, to know that what we were doing then was at variance with reality," Mr Norris told the Treasury and Civil Service Select Committee.

During an intense grilling lasting more than two hours, and watched from the visitors' seats by Peter Baring, the bank's former chairman, Mr Norris said he accepted his ``share of responsibility'' for Baring's collapse.

But he denied suggestions from Committee members, including Diane Abbott and Quentin Davies, that his failure to spot Leeson's activities in Singapore was caused by the pounds 1m bonus to his salary that he would have been awarded in March 1995, if the bank had maintained its profit target.

Mr Norris said: "If you are trying to imply that it had any impact towards my conduct of business ... you are wrong."

In a tense exchange with Mr Davies, he rejected suggestions of dishonesty over his denials that he had any inkling of what Leeson had been up to prior to the collapse.

Mr Davies repeatedly quoted sections of the report by Singapore investigators which implied that they did not believe Mr Norris's version of events. The MP cited several instances where Mr Norris's evidence had been contradicted by other witnesses to the Singapore inquiry team.

"Is this not a devastating indictment of your honesty?" Mr Davies asked. "There is a lot in the Singapore report that is very soundly based and did happen," Mr Norris replied. "There is also a great deal that is quite without foundation in fact and is conjectural."

Mr Norris admitted that controls over Leeson's activities were not as strict as they might have been, partly because regulatory systems appeared to be in place already and Baring's office in Singapore appeared to be making a substantial profit for the parent bank.

"Where consistent reporting comes through and reports are positive, critical faculties are less evident," he said. He added that outside regulators would, in any event, find it difficult to set up the structures needed to prevent a similar fraud taking place again, although the primary focus of what had happened was down to the rogue activities of one man, Nick Leeson.