The fact that no one even asked Leeson to justify his requests is all the more astounding given the size of his demands. At the end of Dec 1994, the cumulative funding of BFS by Barings London and Tokyo stood at US$354 million. In the first two months of 1995, this figure increased by US$835 million to US$1.2 billion.

The BoBS inquiry team notes, "We described...how [Tony] Railton [Futures and option settlements senior clerk] discovered in February 1995 that the breakdown of the total US Dollar request was meaningless, and that the BFS clerk knew the total funding requirement for that day and made up the individual figures in the breakdown to add up to the required total." From November 1994, BFS usually requested a round sum number split equally between US dollars for client accounts and proprietary positions. The BoBS team notes, "Tony Hawes [group treasurer] confirmed that he identified this feature of the requests: 'That was one of the main reasons why during February 1995 I paid two visits to Singapore.' If the US Dollar requests had been in relation to genuine positions taken by clients and house [Barings itself], on any one day we consider it unlikely for the margin requests for these two sets of positions to be identical; as for having the requests split 50:50 most days, this is in our view is beyond all possibility. Tony Hawes appears to agree with this view. He told us that: 'It was just one of the factors that made me distrust this information... It was quite too much of a coincidence. ...Throughout I put it down to poor book-keeping and sloppy treasury management in Barings Futures [BFS].

"David Hughes [Treasury Department manager] also told us that the 50:50 split: 'was a cause for concern...we said, this cannot be right.' He explained that: 'I do not think we could have house positions and client positions running totally in tandem.' [Brenda] Granger [manager, futures and options settlements] confirmed that she would have spoken to Hughes about the split. She added: 'We would joke about Singapore, -Why don't we send somebody's mother [anyone] out there to run the department since Nick is so busy now?".

Staff in London could not reconcile funds remitted to Singapore to both proprietary in-house and individual client positions. But no remedial action was taken. Their cavalier attitude to reconciliation is illustrated by Figure 10.4³ which shows total funds remitted to Singapore ostensibly to pay customer margins. place fig 10.4 here

The solid line in Figure 10.4 shows the total funds sent to BFS by Barings Securities London (BSL) - the entity to which all customer trades of London were booked; the broken line the amount of money funded by Barings Securities Group Treasury in London, this funding was known in the firm as the 'top-up' balance. The Group Treasury advanced this money, on behalf of clients, because it was not always possible for clients to transfer money to Barings in time to meet SIMEX intra-day margin calls. (The bank was expected to recover from clients these advances as quickly as possible.) Figure 10.4 shows that BSGT had to consistently advance a substantial portion of the funds earmarked for margins for client positions. The graph shows that from 1 January to 24 February 1995, the proportion of genuine client moneys which were transferred to BFS fell as a proportion of the total funding Indeed on 21 February 1995, BSGT had to advance all the client margins of some US$440 million. On 24 February, only US$50 million of the US$540 million sent to Singapore to cover client positions had been recovered from individual clients (i.e. the difference between the solid and broken lines). Barings control did not reconcile the top-up payments to individual client balances - if it did it would have discovered that it was sending out far too much money just to cover the margin calls of clients.

Figure 10.4 Top-up Funding from BSGT to BSL and Margin Balances from BFS from 1 January 1995. Reproduced be permission from the Report of the Board of Banking Supervision Inquiry into the Circumstances of the Collapse of Barings