Leeson was shadowed before bank's collapse

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Barings traders, including Nick Leeson, were shadowed by three former policemen for two months before the bank collapsed, according to sources in Singapore.

Simex, the Singapore exchange, was so concerned at tip-offs about possible wrongdoing that it posted the men in the Nikkei futures trading pit and gave them authority to examine all Barings' deals and closing positions at the end of each day.

The exchange has been anxious to present itself in a positive light, pointing to the fact that it raised questions about Barings' level of trading as early as January. But bankers in Singapore are privately hoping that the investigation into the £850m losses will ask whether Simex ought to have warned Barings earlier, given that there was sufficient concern in December to put three observers in the trading pit. Barings collapsed in February.

A source within Barings in Singapore said that he believed Simex's regulators were tipped off by other traders who had watched the company's level of trading increase enormously under Mr Leeson. He said: "These three guys appeared round about December and began watching us like hawks. They were hanging around in the Nikkei 225 pit [where Mr Leeson was trading] and keeping an eye on the trades and they would pay special attention at the close of business." The source said that the three officials did not watch only Mr Leeson, 28, who is being held on forgery charges in Frankfurt. But they did examine his trades and the end-of-day records relating to them. Simex issued a number of warnings to Barings in January and February and was given assurances in early February, by Anthony Hawes, the group treasurer, that all the bank's commitments - in the form of increasing margin calls as the Japanese market collapsed - could be met.

No senior Simex officials could be contacted last night. A lawyer working on the investigation said that he could neither confirm nor deny that Barings had, in effect, been under surveillance. Barings in London said it did not know about the scrutiny by the three Simex officials.