Barings Bank Collapse Analysis

2 his ego and greed were exacerbated by the macho trading environment in which he operated.

Barings bank collapse analysis.

The barings bank collapse is a tale of tragedy involving greed poor banking oversight and a complete failure of internal checks and balances that ruined the oldest bank in london and banker to the queen. In 1890 barings was bailed out after an ill fated move into argentinian infrastructure finance. In 1995 the financial markets were shaken by a massive scandal. In february of 1995 one man single handedly bankrupted the bank that financed the napoleonic wars louisiana purchase and the erie canal.

Founded in 1762 barings bank was britain s oldest merchant bank and queen elizabeth s personal bank. Judith rawnsley who worked for barings bank and later wrote a book about the leeson case proffered three explanations for leeson s behavior once the losses had started to pile up. London beginning of the year 1990. Barings collapse also bears out the need for good controls.

The risk taker as sh adow. As the market fell more than 15 percent in the first two months of 1995 barings futures suffered huge losses which were made even higher due to the sale of options which implied a bet on a stable market. The collapse of barings bank in february 1995 was caused by colossal losses incurred by a single rogue trader. Su ch man m.

1 leeson s loss aversion stemmed from his fear of failure and humiliation. Barings one of the most prestigious banks in the united kingdom is bankrupt following losses caused by nick leeson one of its traders aged 28 years. 3 he suffered from common distortions in thinking patterns that often result from high levels of stress including overconfidence and denial. The prestigious barings bank sends one of their traders a young englishman named nick leeson born in february 1997 to work in its singapore branch.

Journal of management studies 2000 37 1215 1229. As losses mounted leeson increased the size of the position in a stubborn belief he was right. It took only several weeks for nick leeson the singapore trading head of the bank to amass hundreds of millions of pounds in losses which he camouflaged as profits before fleeing from the law. A psychoanalytic view of the collapse of barings bank.

Barings bank definition barings banks was a british merchant bank that collapsed in 1995 after one of its traders lost over 1 billion in unauthorized trades. Ironically barings may be the only bank to have illustrated twice the dangers of growing complex far flung businesses.