The collapse of Barings was apparently caused by the acts of one man far away.

It exposed in a moment the awful fallibility of a large, respected, financial institution to malpractice.

Were the controls adequate? Was the man in charge in Singapore trusted too much or was there greed at the head office in London that contributed to the disaster? Should the local, or our own, regulators bear some part of the blame? The questions have not yet been answered but it is clear that Barings, out of the blue, became insolvent.We need to know how it happened and to receive some assurances against future repetition.

It may all come down to a question of controls, or the lack of them.

The back office should control the front office but in this case it appears that this too was in the hands of one man.It is still not clear why Barings could not close out their positions once they knew things had gone too far or why the Singapore International Monetary Exchange (SIMEX), as the local regulator, allowed this lack of control to continue.The derivatives market has had a stormy life.

In 1989 the swap market, an important sector, was shaken by the Hazell v Hammersmith BC case.

Swaps, described by the Bank of England as assisting 'traders to solve financial problems arising our of variations in interest rates and currency exchange rates, different taxation regimes and rate of inflation and different creditworthiness' appeared to the House of Lords in a different light.

Lord Ackner said: 'I therefore conclude that swap transactions are essentially speculative methods of raising money.' Lord Templeman rejected the suggestion that a swap might be likened to a form of insurance and could see no real difference from gambling.But the derivatives market is accepted.

It provides an important form of Treasury management, gives employment and provides a considerable source of invisible earnings for the country.

However unpopular the banks may be, they are vital to the economy.

Yet there are serious legal problems affecting them.The Barings affair raised echoes of 1974 when a currency dealer in the Lugano branch of Lloyds Bank International made unauthorised deals which resulted in a loss to the bank of £30 million, a considerable sum at the time.Lloyds was able to send out a team of experts who managed to close out every position, to establish just what losses had been made by whom, to make the necessary compensating payments, and to recommend new controls, reporting and supervisory procedures.

Insurance mitigated the loss.

By the time the media were aware of it, remedial action had been taken.It will not be easy to make sure that there will be no further disasters.

Malpractice is so difficult to guard against.

As Chief Justice Bryan said in the 16th century: 'The Devil himself knoweth not the mynd of Man.'The very functions of a busy dealing room do not lend themselves to rules and regulations.

The word of a dealer, speaking into one of several telephones must be binding on his or her principal.

The counterparty will know nothing of the limits and procedures binding on the person whose voice has just said 'Done'.

For the operation of the market it has to be binding.

Barings never suggested otherwise.The chancellor has asked the Board of Banking Supervision to investigate the way Barings' subsidiaries in Singapore were managed from the group's London head office and seek to establish the role played by SIMEX.

It will try to find out exactly what happened in Singapore where Mr Leeson built up the massive futures position.

The team includes the governor of the Bank of England as chairman, the deputy governor and another director.Not long since, there was criticism of the Bank for its part in the BCCI affair when warning was given to it by the auditors of BCCI without, it has been said, sufficient notice being taken of it.

There was criticism of the Bank in the collapse of Johnson Matthey for failing to heed the danger signals.

There is criticism of the Bank in the Barings case itself for failing to bale out Barings with a lifeboat operation as was so successfully done at the time of the secondary banking collapse of the 1970s.

Inevitably, it has been suggested that the Bank should not be taking such a leading part in the present enquiry.

As Juvenal said two thousand years ago: 'Quis custodiet ipsos custodes?'How can future collapses be prevented? It seems likely that the regulators, who have failed so dismally so far, will propose more regulation, more reporting, more supervision.

Is there a case for more drastic solutions? Should the winners of the gamble, said in this case to be the Japanese securities houses, always be so protected by the law as to bring down the parent of the company with whom they were dealing? It has been suggested that everyone in SIMEX knew that Barings' position was wildly in excess of all reason and that some at least knew that no clients of Barings were involved.If so, could there have been doubt that the successful dealers were acting in good faith? If this market is so akin to gambling, is th ere a case, the Financial Services Act or not, for providing the same consequences? Those who bet on the turf seem not much deterred by the legal irrecoverability of their winnings.

Should the derivatives market legally (and perhaps morally) be put in the same position?Everyone must wish Mr George and his team success in finding the right safeguards for the future.

And realise how difficult the task will be.