Barings Brass Apparently Knew of Risky Investments : Finance: British bank’s fall has been blamed on ‘rogue trader.’ Officials in Singapore implicate his superiors.

While a lone trader has been widely accused of bankrupting Britain’s Barings Bank with rogue investments, exchange officials said Saturday that senior bank executives in London had long been aware of the risks, had approved at least some transactions and even sent out nearly $1 billion to help pay for them.

“It appears the corporate group took a bet on the market and lost a lot of money,” said K. Shanmugan, a lawyer representing the Singapore International Money Exchange, Singapore’s futures exchange.

Barings, one of Britain’s oldest banks, was put into receivership after losing more than $1 billion in a series of transactions known as futures trades that, in this case, essentially bet on the future price of the Nikkei index of leading Japanese stocks. Barings bet billions that the index would rise, but it plummeted instead.

The head of Barings Futures in Singapore, 28-year-old Nicholas Leeson, fled the country and was arrested in Frankfurt, Germany, last week after arriving on a flight from Malaysia. He is being held while awaiting an extradition hearing on a Singapore warrant charging him with forgery for the purpose of fraud. Leeson’s lawyer said he will fight extradition by citing Singapore’s human rights record.

Eddie George, head of the Bank of England, had alleged that Leeson was a “rogue trader” acting on his own, while Peter Baring, chairman of Barings Bank, suggested in interviews that the bank was the victim of a criminal conspiracy.

But documents released in Singapore on Saturday painted a different picture. One internal memo dated March 25, 1992, showed that the firm was aware of the dangers involved.

The 1992 memo, written by James Bax, Barings’ managing director in Singapore, said, “My concern is that once again we are in danger of setting up a structure which subsequently proves disastrous and with which we will succeed in losing either a lot of money or client goodwill or possibly both.”

At a tumultuous news conference, officials at the Singapore International Monetary Exchange, or Simex, also disclosed that two senior officials of Barings’ London office flew to Singapore and met Feb. 8 with exchange officials, who expressed concern about the huge risk the company had taken.

The Barings officials, including Treasurer Anthony Hawse, reportedly gave assurances to the Singaporeans that adequate credit facilities were available to meet the company’s obligations, the Simex officials said.

They said that between the beginning of January and Feb. 24, Barings’ London office transferred $921 million to the Barings Futures office in Singapore to meet margin calls when the decline in the Japanese index showed that the firm was losing money.

In another sign that senior management was aware of the situation at the Singapore office, an internal audit last August drew attention to the dangers of having Leeson manage both the futures department and the back-office settlement functions that would normally provide checks and balances.

“There is a significant risk that controls could be overridden by the general manager,” the internal audit warned, according to a passage read at the news conference Saturday. The auditor warned of an “excessive concentration of powers” in Leeson’s hands.

While officials stressed that they were providing evidence of neither guilt nor innocence on Leeson’s part, they left no doubt that Barings’ London office was aware of the extent of the risk exposure and had approved it.

Lawyers who have been appointed to administer Barings’ Singapore office said there were also at least two letters signed by Bax, the local managing director, as well as by London Barings officials assuring the exchange that they were aware of the risks involved in the investments and that the firm had the resources to cover potential losses.

There have been reports in the Singaporean media that officials of the Commercial Affairs Department have seized the passports of Bax and other Barings officials in Singapore to keep them from leaving the country.