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Dutch Rival Takes Formal Control Of Barings Loss Estimates Are Now Running Much Higher Than What The Failed Bank Earlier Thought

Tue., March 7, 1995

Dutch financial conglomerate ING Group took control of Barings PLC Monday, saying it wants to resurrect the storied bank’s business before worrying about who might be responsible for the collapse.

“We are not going to fire anybody,” said Aad Jacobs, chairman of ING group at least not until British banking supervisors complete their investigation of the debacle.

After overcoming objections from bondholders who stand to lose millions, ING Group won British court approval to take over all the valuable assets of Barings by assuming its liabilities.

ING, a banking and insurance group that is Holland’s biggest financial services company, will get Barings’ asset management division, its corporate finance arm and international stock brokerage. These are exactly the sorts of operations ING has said it wanted to expand beyond the Dutch market.

The collapse of Barings, the 232-year-old investment house that symbolized Britain’s upper crust and epitomized the bowler-hatted banker, shocked London’s financial district and sent ripples throughout global markets.

But ING could hardly have found a better fit to fall into its lap in the financial equivalent of a fire sale.

Barings went bust on Feb. 26, after accumulating what ING said were 860 million pounds or about $1.38 billion in losses on Asian futures market, nearly twice the bank’s cash reserves.

ING Group will pay a symbolic 1 pound for Barings, then inject 660 million pounds into the bank, which will cover the outstanding liabilities and leave Barings a substantial cushion.

Previous estimates had put the Barings losses at 625 million pounds or about $1 billion, but the numbers worsened as Tokyo stock prices plunged.

Now that ING has salvaged Barings, it hopes a quickly resurrected operation will keep too many talented employees and lucrative clients from leaving.

Barings has blamed its downfall on trader Nick Leeson, who wrongly bet Tokyo stock prices would rise. Leeson is now jailed in Frankfurt and fighting extradition to Singapore, where he was based as a Barings trader. Singapore authorities have said he’s under investigation for forgery.

Although a number of recent developments have suggested that Barings management had ample warning of the crisis, ING said nobody will be forced to quit at present.

But Leeson’s official standing with Barings remains unclear. A Barings executive, speaking on condition of anonymity, said Leeson is no longer employed, but declined to explain whether he resigned or was fired.

ING intends to keep the 4,000 staffers at Barings and to pay out tens of millions in bonuses the bankers earned last year - with a few exceptions.

“We are not going to pay the bonuses to Mr. Leeson,” Jacobs told a news conference in the executive dining room at Barings.

Barings directors are also going to forsake bonuses and Jacobs suggested bonuses of top executives will be deferred until regulators determine what happened.

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