[Extract from the conclusion of the Bank Of England Report on the Collapse of Barings]

GENERAL

13.79

We should record that, since that we have not had access to
evidence from a number of sources including Leeson himself, we are
unable to determine what the motives were for Leeson's activities.
Leeson was awarded very sizeable bonuses for what were thought at
the time to be his consistently profitable activities; such bonus
for 1994 being proposed as £450,000 (compared to £130,000 for
1993). Whether the prospect of an increased bonus was, in whole or
part, the motivation to Leeson for his unauthorised trading which
resulted in such massive positions being taken cannot at present
be determined. We also cannot determine, in the absence of full
access to documentation in Singapore, whether or not there was a
misappropriation of any of the funds advanced to BFS. Moreover, we
cannot rule out the possibility that Leeson may have been acting
in concert with one or more persons.

13.80

We have set out in the previous sections of this report the matters
which we have, on the information available to us, identified as
the events leading to the collapse of Barings. This collapse was
brought about by the unauthorised trading activities within BFS -
one overseas subsidiary within a large group but whose activities
accumulated losses of around £830 million and caused the ultimate
parent company, Barings plc, to be placed in administration. Most
of the assets and liabilities of the Barings Group were
subsequently purchased by ING and the interests of depositors and
creditors were thereby protected. But others, including the
shareholders and loan note holders of Barings plc, the providers
of capital have suffered serious loss. The collapse of Barings in
an illustration of how a viable and prosperous group can, in
circumstances where controls are ineffective, be brought down by
unauthorised activities within one of its subsidiary operations.

13.81

We have concluded that the system of checks and balances necessary
for the proper management and control of a financial institution
failed in the case of Barings with regard to BFS in a most serious
way, at a number of levels and in more than one location. That
lessons can be learned from the collapse is clear to us; and it is
to these lessons that we turn in the following section of this
report.