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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Mortgage Administrator

£20000 - £25000 per annum: Recruitment Genius: We are a vibrant and establishe...

Recruitment Genius: Payments Advisor

£15000 - £20000 per annum: Recruitment Genius: An experienced Repayments Advis...

Recruitment Genius: Investment Analyst

£25000 - £30000 per annum: Recruitment Genius: This leading provider of financ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you looking to take your ...

Day In a Page

A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935