Living in a fool's paradise: the collapse of Barings' Bank

Recalls that the collapse of Baring's bank showed what may lie behind an apparently successful organization. Barings was destroyed by the unauthorised activities of a trader named Nick Leeson. For almost three years Leeson deceived the bank by appearing to earn phenomenal profits, while in real...

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Bibliographic Details
Published in:Management decision 2002-04, Vol.40 (3), p.232-238
Main Author: Drummond, Helga
Format: Article
Language:English
Subjects:
Arbitrage
Bank fraud
Banking
Banking industry
Corporate governance
Corporate profiles
Investment bankers
Investment banking
Leeson, Nicholas W
Liability
Options trading
Profitability
Profits
Psychologists
Risk management
Volatility
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Summary:Recalls that the collapse of Baring's bank showed what may lie behind an apparently successful organization. Barings was destroyed by the unauthorised activities of a trader named Nick Leeson. For almost three years Leeson deceived the bank by appearing to earn phenomenal profits, while in reality incurring massive and ultimately catastrophic losses. A striking feature of the bank's collapse is that it was both sudden and total. No one had the least suspicion of impending catastrophe despite the emergence of clear signs of malfeasance. The article explains why Barings' management failed to respond effectively to those danger signs and considers the lessons to be learned.
ISSN:0025-1747
1758-6070
DOI:10.1108/00251740210420183