Fin 444

3343 Words May 4th, 2011 14 Pages
Barings Bank and Nick Leeson
Introduction I would like to present the case of Barings Bank, one of the most famous histories in the world when one man led to the bankruptcy the oldest British bank. Barings collapsed on February 26, 1995, due to the activities of one trader, Nick Leeson, who lost almost $1.4 billion. The loss was caused by a large exposure to the Japanese stock market, which was achieved through the futures market. Leeson, the chief trader for Barings Futures in Singapore, had been accumulating positions in stock index futures on the Nikkei 225, a portfolio of Japanese stocks. 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
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However, at that time, they had been bailed out by the Bank of England and other London banks. From then on, however, Brings continued in traditional merchant banking, building up a reputation based on corporate finance, strong investment management, and the trading it did for one of the best clients in London, including the Royal Family. In 1984 it acquired the stockholding business of small stock broking company, Henderson Crosthwaite, with a staff of 15 based in London, Hong Kong and Tokyo. Baring Brother and Company (BB and Co) then established Baring Securities Limited (BSL), as a separately and liberally managed business within the group. BSL was very successful, enjoying the fruits of the 1980s Tokyo Stock Market boom, and specialized in Japanese equity warrants – bonds sold with warrants exercisable into shares. Growth of business in emerging markets together with expansion of securities induced Barings to consolidate BB and Co and BSL. Board of the Bank was very satisfied with the presence on the Asian market and in order to develop much faster it