THE Bank on England yesterday said it was making sweeping changes to banking regulation in the wake of the Barings collapse, a move broadly welcomed by the financial community.
The announcement followed a review by consultancy firm Arthur Andersen, which was hired last year to respond to recommendations in Britain's official report into Barings by the bank's Board of Banking Supervision (BOBS).
The bank said it might need to increase its current £35 million sterling supervisory budget by 25 per cent as it implemented the changes, including recruiting up to 100 new staff.
Mr Howard Davies, deputy governor of the Bank of England, told a news conference that the review had picked up a consistent theme, since the collapse of Barings that top officers of a bank should submit an annual statement to the Bank of England.
When Barings collapsed in February 1995 after Singapore based trader Nick Leeson ran up huge losses in illicit derivatives trades, the men at the top of Britain's oldest merchant bank said they were unaware of his positions.
But Mr Davies said the changes were not designed to prevent other bank failures. "Banks are in business to take on risk. If they did not do so, there would be no point in having them. So banks will still fail and we cannot pretend to have the ability to prevent that happening, nor should we do so," he said.
Arthur Andersen urged changes in the culture at the Bank of England's Supervision and Surveillance (S&S) unit, headed by Mr Michael Foot, to create a more stimulating working environment and to increase the levels of skills and experience of its staff.
