Warburg dispels rumours of disaster in derivatives

BY JOHN WILLCOCK

Fears of "Barings-style" difficulties in the derivatives market swept both sides of the Atlantic last night as the troubled UK investment bank SG Warburg and America's blue chip bank J P Morgan were forced to make statements to douse the rumours.

Warburg denied that it was having difficulties meeting margin calls on Frankfurt's futures and options exchange, the Deutsche Boerse AG (DTB) and Morgan issued a two sentence statement amid mounting speculation that the Federal Reserve had been forced to bail out one of its derivative units.

Morgan said: "It is our practice not to comment on our financial performance until we release out quarterly results. We see no reason today to depart from that practice."

Warburg said there was no truth in the rumours that had knocked its share price down as low as 680p before ending 7p lower at 689p.

The rumours came as six Wall Street securities houses undertook yesterday to follow much tougher controls on their derivatives operations in order to avoid similar problems.

In Frankfurt, Joerg Franke, the board official responsible for the DTB told Reuter the exchange had no indication that any institute trading on the exchange was in trouble.

There were strong market rumours that MM Warburg, a German bank with no connection to SG Warburg, was having problems meeting margin calls. MM Warburg denied any problems.

SG Warburg, Britain's leading merchant bank, has been the subject of continuing rumours following its aborted merger talks with American giant Morgan Stanley.

A Warburg spokesman confirmed the bank had sacked 90 people in its derivatives section, based in London, Tokyo and Chicago, as part of a plan to scale down the derivatives section at the bank, which currently employs 240 people.This follows over 180 job cuts when Warburg slashed its eurobond activities in January,and reinforces the view that Warburg is in the throes of a large cost cutting programme.

The Warburg spokesman said the decision had nothing to do with the collapse of Barings last week after losses made by derivatives trader Nick Leeson in Singapore.

The sackings were ordered by a new executive committee set up after the bank's managing director, Lord Cairns, was replaced by Sir David Scholey on 13 February, he said.

He added that the dismissals had not affected Warburg's staff in Singapore. The Barings collapse "was not in any way a problem connected to derivatives products, but to the internal controls at the bank," he said.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee