Baring Bros. and Co. was warned seven months before Nick Leeson brought it down that the trader held too much power with too little supervision, investigators said Saturday.
They also made public a letter showing Barings was told of the potential problem as far back as 1992.A British newspaper, meanwhile, reported Sunday that Leeson threatened to name senior British Conservative party figures involved in the collapse.
The disclosures raised questions about whether Leeson, a 28-year-old Briton, bears sole responsibility for ruining the 232-year-old bank by losing $1 billion in futures trading.
Barings has said it first learned of the problem on Feb. 23, the day Leeson left Singapore for Malaysia. He resurfaced in Germany on Thursday and was detained by police at the Frankfurt airport.
Singapore is seeking his extradition, which Leeson says he will fight.
Leeson was the chief futures trader for Barings at the Singapore International Monetary Exchange, or SIMEX. He also was in charge of squaring his books - meaning he was policing himself.
This arrangement was viewed with concern by an internal audit of Baring Futures Singapore in August 1994.
"There is a significant general risk that controls could be overridden by (Leeson). The front and the back office operations are managed and controlled by . . . Leeson. This represents an excessive concentration of powers," said K. Shanmugan, a SIMEX lawyer.
Companies commonly divide responsibilities for initiating, settling and recording transactions to reduce the possibility of error and fraud, he said.
The audit advised restructuring the operations, but Barings ignored the recommendation, said Michael Lim, managing partner of Price Waterhouse, the international accountant appointed to administer Barings' Singapore office.
A blunt SIMEX statement said a failure of internal controls allowed Leeson "to commit the Barings Group to substantial positions which now account for the loss sustained."
Barings PLC, the bank's parent company, refused to comment Saturday.