Barings knew of Leeson's trading

SUPERVISION of Nick Leeson's Singapore trading operation was transferred to London after Barings' Tokyo office became concerned about maintaining proper controls.

The switch took place 'many months ago', and about the same time that Leeson's profits and trading started to shoot upwards, according to a well-placed source.

The Tokyo office was unhappy supervising the 28-year-old arbitrageur, and asked the London office to take direct control as an internal audit warned of a potential problem in Singapore.

'We did not want to take responsibility for the things Nick was doing,' said the source. 'He was always good as a trader, but at first he was making money but not outstanding amounts.' 'Then that changed. The volumes started to shoot up. We were very concerned about supervision.' The transfer of supervision switched Leeson's reporting line not just from Tokyo to London but also to a different department.

Before the change he was supervised by Barings Securities. After, by Baring Brothers & Co - the banking arm which had far less experience of the derivatives Leeson was trading in.

Leeson was supposed to have no exposure to Nikkei 225 movements. He was meant to trade the futures on exchanges in Osaka and Singapore - taking opposite positions on each exchange to cancel out the effect of Nikkei movement.