LONDON — Managers of Barings Bank, auditors and regulators all missed danger signals about trader Nick Leeson, whose losses brought down Britain's oldest merchant bank, an official inquiry reported Tuesday.
The Board of Banking Supervision laid the major blame on Leeson, so far the only person facing criminal charges, but did not rule out the possibility that other Barings' employees or outsiders broke the law. The bank collapsed in February.
Leeson, who is jailed in Germany while fighting extradition to Singapore, where he worked for Barings, refused to cooperate with the inquiry. His attorneys disputed some of the report's findings, but did not provide details, the report said.
Leeson faces fraud charges in Singapore.
Gordon Brown, Treasury spokesman for the opposition Labor Party, said the report was a "damning indictment of the Bank of England's whole approach to the supervision of the banking system," which relied too much on informal contact.
But Treasury chief Kenneth Clarke told the House of Commons that those responsible for supervising and regulating Leeson were, at worst, complacent.
"It never actually crossed their minds that they might be playing some small part in such a huge and systematic process," said Clarke, the chancellor of the exchequer.
"The management of Barings did not question the extraordinarily high levels of apparent profitability of supposed arbitrage dealings in Singapore, which were regarded as being without risk," Clarke said.
"In the Board of Banking Supervision's view, these profits should have been viewed as abnormal and questionable, and the extraordinary profitability reported in 1994 should have attracted the close and thorough attention of the management long before the collapse," Clarke said.
The Board of Banking Supervision said there was no evidence that the Bank of England could have prevented the collapse, and said its regulatory mechanisms were basically sound. However, it found "some areas in which the Bank's performance could have been better."