Barings Bank

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Barings Bank was Britain's oldest merchant bank. It had financed the Napoleonic wars, the Louisiana purchase, and the Erie Canal. Its spectacular collapse in February 1995 was caused by the actions of a single trader, Nick Leeson, working at a small office in Singapore.

Leeson took unauthorized speculative positions primarily in futures linked to the Nikkei 225 and Japanese government bonds (JGB) as well as options on the Nikkei. He hid his trading in an unused account. He lost money from the beginning, and increasing his speculative trades caused him to lose even more. By the end of 1992, the secret account was under water by about £2 million. A year later, the amount had mushroomed to £23 million.

By the end of 1994, Leeson's secret account had lost a total of £208 million, of which Barings management was unaware. Leeson hopped a plane to Kuala Lumpur on February 23, 1995, leaving a £827 million (US$1.4 billion) hole in the Barings balance sheet.[1]

References

  1. Barings Debacle. riskglossary.com.