Barings may have violated Britain's banking rules when it transferred $1.3 billion to back a Singapore trader's financial gambles in the weeks before the bank's crash, two British newspapers reported Sunday.
There is also growing evidence that Barings knew about trader Nick Leeson's risky dealings, ignored warnings of a possible disaster and may have misled the Bank of England when it asked for help in putting together a rescue package. The Observer newspaper reported American regulators threatened to close Barings' New York brokerage office last year because of serious failures in management.Barings insiders were quoted by the paper as saying that was another example of the bank's lax supervision of its overseas operations, which allowed Leeson to bust Britain's oldest investment bank.
A report released Saturday by accountants Price Waterhouse in Singapore said Barings transferred $890 million from its London head office in January and February in mandatory up front money to back Leeson's future trading.
The Sunday Telegraph said bankers in London insist that $1.3 billion was transferred to Singapore. It quoted top financial sources as saying the bank sent the money from London to Singapore and opened a special account in the Cayman Islands to cover Leeson's dealings.
The huge transfers to Singapore represented more than twice the bank's capital, estimated at around $560 million.
The 1987 Banking Act prohibits banks from putting more than 25 percent of their money into any single "basket" without authorization from the Bank of England.
It appears unlikely that Barings sought such permission because Bank of England Governor Eddie George said at the time of Barings' collapse that bank executives told him they had not known they had a problem until Feb. 23.
Investigators in Singapore said Saturday that Barings was warned seven months ago that Leeson held too much power with too little supervision.