Dutch stage £1.6bn rescue of Barings

THE BARINGS CRASH: Staff guaranteed £100m in bonus payments
Click to follow
The Independent Online
Internationale Nederlanden Group, the Dutch financial giant last night staged a £1.6bn rescue of Barings, the Queen's bank, alleged to have been brought down by the high risk share trading of 28-year-old trader Mr Nick Leeson. The banking and insurance group - Holland's second largest financial institution - is pumping in an immediate £660m in cash and meeting all liabilities estimated at £1 bn. It was unclear last night whether all of the £2 bn of depositors money, now frozen, is secure. There is still some doubt over whether investors in Barings' bonds is safe. But Barings' staff are guaranteed their £100 m bonuses for last year. A spokesman for ING said last night the company was committed to the staff and no boardroom resignations had been sought or offered. ING's offer beat off a rival bid from its Dutch arch-rival ABN Amro less than an hour before the self-imposed midnight deadline - which coincided with the reopening of the Tokyo stock market on which Leeson had bet the bank. ING has bought almost all of three parts of the Baring business: The fund management side of Baring Asset Management which handles £30 bn of money; The deal making arm Baring Brothers which, among others is advising Lloyds Bank on its takeover of the Cheltenham & Gloucester Building Society, and Baring Securities stockbroking arm. The bank's administrators, accountants Ernst & Young, will today apply to the High Court for approval of the deal. Despite the rescue, however, a row is brewing in both the City and in Westminster over the bonus payments and the role played by senior Bank of England's in the affair. Both Kenneth Clarke, the Chancellor, and Eddie George, the Governor of the Bank of England will face mounting pressure this week to disclose precisely what they knew of Barings' financial problems. Concern over the Bank of England's ability to supervise banks deepened last night in the face of its refusal to comment on its role in the affair and ING's figures which show that Barings' total liabilities are £1 billion, almost triple the bank's assets. This is £300 million more than first thought - a further £100 million was unearthed on Saturday. It is widely believed that £800 million was used to settle the trades of Nick Leeson, the dealer at the centre of the debacle. Under the 1987 Banking Act, Barings should not have advanced more than £110m, a quarter of its capital, without the specific permission of the Bank of England's supervisors. Baring executives were required to report such a transaction to the Bank. The Labour Party will question whether Mr George should chair the inquiry into the affair given the doubts over the Bank's role. Alistair Darling, Labour's City spokesman, last night described the bonus payments to Barings' staff as "outrageous". But one banker said: "There are some really good people at Barings who need to be incentivised." Last week Lord Alexander, chairman of NatWest Group, personally interviewed a number of key corporate finance figures and offered them more than their promised bonuses as a "signing on" fee if they would defect to NatWest. Barings' corporate finance division, which made about £20m profits out of the bank's total of £100m, will be paid bonuses totalling £50m. At one stage during rescue talks over the weekend it was suggested that the issue of bonus payments was delaying progress. "That's bunk," a source close to Barings said. "The first priority is to get a deal done - a lot of people are extremely desirable to headhunters." He said the final outcome of bonus payments would be a matter for discussion once the bank was under new ownership. Mr Darling said: "It speaks volumes for the state of this country that these bonuses should be paid to people in Barings while the bank lies in ruins around them." Labour will this morning demand that Mr Clarke returns to the Commons to give a fresh statement to explain how much he knew of what led to Barings' collapse. In a statement last Monday Mr Clarke said the collapse appeared to centre on "one rogue trader".

Labour believes that by the time he made the statement, the Bank of England should have known that senior Barings' executives were aware of Nick Leeson's exposed positions in Singapore. Mr Leeson is due to meet his British lawyers this morning to make aformal decision to appeal after spending four nights in a Frankfurt prison fighting extradition plans from the Singapore regulators. The Singapore authorities have charged Mr Leeson with falsifying documents to prepare fraud and breach of trust. The UK's Serious Fraud Office, which announced it would conduct an inquiry into possible fraud at Barings, has yet to say whether it wishes to seek Mr Leeson's extradition to Britain. Questions are also expected over the huge rise in Barings' requirement for cash. Monthly reports on a bank's liquidity position are required under the Banking Act. But even if Barings failed to disclose to the Bank of England its sudden need for huge sums, bankers say the supervisors ought to have picked up signals from the money markets that Barings was increasingly drawing on credit facilities from the end of January. It has emerged that the Bank of England has not yet seen all key information, provided by Barings to its potential buyers last week. It is now understood that the key Barings committee which handled the movement of money around the group was the Assets and Liabilities Committee (ALCO) which is alleged to have known of the growing problems in the Far East for months. Prominent on the committee is Ron Baker to whom Leeson reported and Charles Irby, a corporate financier, George Maclean and Geoffrey Barnett, both of whom worked for Barings Bank, and Ian Hopkins who headed Barings risk committee. Late last week the Serious Fraud Office (SFO) announced that it is investigating possible fraud at Barings. If any Barings staff are found to be in breach of the Banking Act by either making or authorising irresponsible loans or by neglecting necessary internal controls they face being banned from any executive responsibility in any part of the City.