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Conclusions

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 l3O,OOO for 1993). Whether the prospect of an increased bonus was, in whole or in 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 is 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 earned om the collapse is clear to us; and it is to these lessons that we turn in the following section of this report.

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