Financial Management Reaction Paper
Collapse of Barings Bank
Barings was the oldest investment bank in Britain, listing among its clients the Queen herself. Indeed, the bank's pedigree was so distinguished that it did not have a logo, it had a crest. The firm traces its origins to John Baring of Bremen, who settled at Exeter in 1717 and set up in business as a merchant and manufacturer. He became one of the leading businessmen in the West Country. In 1762, his three sons established the London merchant house of John & Francis Baring & Co, later known as Baring Brothers. This house traded on its own account, and on joint account with other merchants, buying and selling commodities and other goods in British and overseas markets. It also acted as London agents for overseas merchants, arranging shipping and insurance, and making and collecting payments. This led on to financing the trading activities of these merchants through the provision of advances to them and by accepting their bills of exchange. This banking business was a mainstay of the firm’s work from the eighteenth until well into the twentieth century. Nick Leeson grew up in London’s Watford suburb and worked for Morgan Stanley after graduating from university. Shortly after, Leeson joined Barings and was transferred to Jakarta, Indonesia to sort through a back-office mess involving £100 million of share certificates. Nick Leeson enhanced his reputation within Barings when he successfully rectified the situation in 10 months. In 1992, after his initial success, Nick Leeson was transferred to Barings Securities in Singapore and was promoted to general manager, with the authority to hire traders and back office staff. Leeson’s experience with trading was limited, but he took an exam that qualified him to trade on the Singapore Mercantile Exchange (SIMEX) alongside his traders. “Leeson and his traders had authority to perform two types of trading: 1. Transacting futures and options orders for clients or for other firms
Barings was the oldest investment bank in Britain, listing among its clients the Queen herself. Indeed, the bank's pedigree was so distinguished that it did not have a logo, it had a crest. The firm traces its origins to John Baring of Bremen, who settled at Exeter in 1717 and set up in business as a merchant and manufacturer. He became one of the leading businessmen in the West Country. In 1762, his three sons established the London merchant house of John & Francis Baring & Co, later known as Baring Brothers. This house traded on its own account, and on joint account with other merchants, buying and selling commodities and other goods in British and overseas markets. It also acted as London agents for overseas merchants, arranging shipping and insurance, and making and collecting payments. This led on to financing the trading activities of these merchants through the provision of advances to them and by accepting their bills of exchange. This banking business was a mainstay of the firm’s work from the eighteenth until well into the twentieth century. Nick Leeson grew up in London’s Watford suburb and worked for Morgan Stanley after graduating from university. Shortly after, Leeson joined Barings and was transferred to Jakarta, Indonesia to sort through a back-office mess involving £100 million of share certificates. Nick Leeson enhanced his reputation within Barings when he successfully rectified the situation in 10 months. In 1992, after his initial success, Nick Leeson was transferred to Barings Securities in Singapore and was promoted to general manager, with the authority to hire traders and back office staff. Leeson’s experience with trading was limited, but he took an exam that qualified him to trade on the Singapore Mercantile Exchange (SIMEX) alongside his traders. “Leeson and his traders had authority to perform two types of trading: 1. Transacting futures and options orders for clients or for other firms