Collapse of Barrings Bank

The history of Barings Bank Plc began in 1762 and thus making it the oldest merchant bank of London. Over this period it had managed to earn a high reputation in the global finance market as it assisted in financing the purchase of Louisiana, Erie Canal and the Napoleon wars (Fay, 1996). It was also known as the Queens bank due to the fact that the Queen had an account with Barings. But this success was interrupted in the Mid 90’s when Barings caught the attention of the world due to bankruptcy which was caused by one rogue trader, Nick Leeson, based in a small office in Singapore. His sole trading activities for derivatives on the Singapore and Osaka Exchange lead the 233 years old bank into bankruptcy. Further below we discuss how the bank was lead into bankruptcy.

Question 1 & 2
Nick Leeson, a young man from Watford in England joined Barings in 1989 from Morgan Stanley shortly after having graduated from University. His responsibilities involved doing settlement work and accounting and paying for transactions. Shortly after he was sent to their office in Jakarta, Indonesia to sort out a back-office mess involving £100 million worth of share certificates. After successfully sorting out the mess and having his reputation enhanced, he was appointed the General Manager of Barings Futures subsidiary in Singapore (Risk Glossary, 2008). Originally as General Manager Leeson responsibilities wasn’t trading but he took an exam which allowed him to trade on the Singapore International Monetary Exchange (SIMEX) along with his fellow traders. This meant that Leeson had the responsibilities of a General Manager and with enough trading knowledge he had become the Chief trader and also with his experience of the back-office, he was in charge of back-office duties such as accounting for the transactions (Stock Market, 2008). This lack of segregation of duties has lead to one of the most infamous financial demises of the century.

The tasks of Leeson and his fellow traders