Singapore Says Barings Is Ultimately to Blame in Fiasco

The collapse of Barings bank was precipitated by trader Nicholas Leeson, but “institutional incompetence” was ultimately to blame, the Singapore government said Tuesday.

Citing the results of its inquiry into the collapse, the Finance Ministry said Barings showed a general lack of understanding of the futures trading business.

The ministry said its inquiry, conducted by Price Waterhouse accountants, also found that Barings did not have enough internal controls.

Barings collapsed Feb. 27 after Leeson, a Singapore-based trader, piled up $1.4 billion in losses by betting incorrectly on the direction of Tokyo stocks.

The ministry accused Leeson of using “various devices” to conceal his disastrous trades, which were done through a secret account named 88888.

But it said the collapse could have been avoided if management had paid closer attention.

It accused two Barings senior executives of incompetence, inefficiency and efforts to hinder investigators: Peter Norris, chief executive of Barings’ investment arm, and James Bax, Leeson’s boss.

Norris failed to keep a close eye on Leeson, approved a sizable 1994 bonus for him, and even allowed him to place more bets on the futures market, the Price Waterhouse report says.

Although Norris and Bax denied any involvement, “we are unable to accept their denial,” the investigators said.

The 28-year-old British-born Leeson was arrested in Germany on March 2 after fleeing Singapore. He remains in jail in Frankfurt, Germany, where he is fighting a German court order that he be extradited to Singapore.