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Whatever happened at barings? Part two: Unauthorised trading and the failure of controls

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  • Stonham, Paul

Abstract

The collapse of Barings, one of Britain's oldest merchant banks, in February 1995, was the result of massive losses (over £800 million) run up on derivatives trading by its chief Singapore trader, Nick Leeson. The spectacular failure focused attention on risk management products and the structure and operations of financial institutions trading them. Part Two of this Case Study examines Leeson's unauthorised dealings, together with the techniques he employed to disguise the huge losses on his trading. It is demonstrated that, even within the unauthorised strategies employed by Leeson, he was inconsistent and illogical as well as lacking in good judgement and competence. Official government reports subsequently criticised Barings' internal and external controls, and accused supervisory bodies of lax regulation. Part Two also suggests lessons to be drawn from the collapse.

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  • Stonham, Paul, 1996. "Whatever happened at barings? Part two: Unauthorised trading and the failure of controls," European Management Journal, Elsevier, vol. 14(3), pages 269-278, June.
    • Handle: RePEc:eee:eurman:v:14:y:1996:i:3:p:269-278
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    Cited by:

    1. Gillet, Roland & Hübner, Georges & Plunus, Séverine, 2010. "Operational risk and reputation in the financial industry," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 224-235, January.
    2. Jennifer Kunz & Mathias Heitz, 2021. "Banks’ risk culture and management control systems: A systematic literature review," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(4), pages 439-493, December.

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