Illegal Trading Destroys Barings, Britain’s Oldest Bank (Great Events: 1900-2001)
Article abstract: Barings Bank, the oldest merchant bank in Great Britain doing business continuously since 1762, collapsed under losses suffered because of one of its traders.
A Bank Falls
The story of the collapse of Barings Bank is largely the story of one man. Great Britain’s oldest commercial bank, operating continuously since 1762, was forced to close because of unwise and unregulated trades.
Twenty-eight years old at the time of the bank’s collapse, Nicholas W. Leeson had been hired by Barings in 1989, after his graduation from high school, as a back-office clerk in the London office, settling and accounting for daily trades and payments. By 1992, he was a roving troubleshooter, assigned to a team investigating allegations of fraud within the bank.
Barings sought to establish a presence in burgeoning Far East financial markets. Leeson was sent to Singapore as a settlement officer and eventually allowed to execute trades. He gained a reputation for making money even if the Asian markets sagged, making small but steady profits by detecting the minute differences in the price of financial instruments between the Osaka, Japan, and Singapore financial markets, and buying low in one market and immediately selling high in the other market.
In the fall of 1994, Leeson began making riskier investments in derivatives and futures. The investments were tied to the Nikkei 225, the...
(The entire section is 998 words.)
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