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Encyclopedia > Barings Bank

Barings Bank (1762 to 1995) was the oldest merchant banking company in London, England [1] until its collapse in 1995 after one of the bank's employees, Nick Leeson, lost $1.4 billion in speculation primarily on futures contracts. Barings logo - Uploaded by Pete Cassidy, June 2005 This is a copyrighted and/or trademarked logo. ... BRD-SG in IaÅŸi - A small branch dedicated to retail services For other uses, see Bank (disambiguation). ... This article is about the capital of England and the United Kingdom. ... Motto (French) God and my right Anthem God Save the King (Queen) England() – on the European continent() – in the United Kingdom() Capital (and largest city) London (de facto) Official languages English (de facto) Government Constitutional monarchy  -  Queen Queen Elizabeth II  -  Prime Minister Tony Blair MP Unification  -  by Athelstan 967  Area... 1995 (MCMXCV) was a common year starting on Sunday of the Gregorian calendar. ... Nicholas Leeson (English, born February 25, 1967) is a former derivatives trader whose unsupervised speculative trading caused the collapse of Barings Bank, the United Kingdoms oldest investment bank. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ...

Contents

History

Barings Bank was founded in 1762 as the 'John and Francis Baring Company' by Sir Francis Baring. In 1806 his son Alexander Baring joined the firm and they renamed it Baring Brothers & Co., merging it with the London offices of Hope & Co., where Alexander worked with Henry Hope. 1762 was a common year starting on Friday (see link for calendar). ... This article or section needs to be wikified. ... 1806 was a common year starting on Wednesday (see link for calendar). ... Alexander Baring, 1st Baron Ashburton (October 1774 - May 13, 1848) was an English politician and financier. ... Picture of Rotterdam banker Archibald Hope in 1720 Hope & Co. ... Henry Hope in 1788 Henry Hope (1735 - 1811) was an Amsterdam merchant banker born in Boston, New England. ...


Barings had a long and storied history. In 1802, it helped finance the Louisiana Purchase, despite the fact that Britain was at war with France, and the sale had the effect of financing Napoleon's war effort. Technically the United States did not purchase Louisiana from Napoleon. Louisiana was purchased from the Baring brothers and Hope & Co.. The payment for the purchase was made in US bonds, which Napoleon sold to Barings at a discount of 87 1/2 per each $100. As a result, Napoleon received only $8,831,250 in cash for Louisiana. Alexander Baring, working for Hope & Co., conferred with the French Director of the Public Treasury François Barbé-Marbois in Paris, went to the United States to pick up the bonds and took them to France. --69. ... The Louisiana Purchase. ... For other uses, see Napoleon (disambiguation). ... Picture of Rotterdam banker Archibald Hope in 1720 Hope & Co. ... Alexander Baring, 1st Baron Ashburton (October 1774 - May 13, 1848) was an English politician and financier. ... U.S. postage stamp (c. ... City flag City coat of arms Motto: Fluctuat nec mergitur (Latin: Floating not submerging) Paris Eiffel tower as seen from the esplanade du Trocadéro. ...


Later daring efforts in underwriting got the firm into serious trouble through overexposure to Argentine and Uruguayan debt, and the bank had to be rescued by a consortium organized by the governor of the Bank of England, William Lidderdale, in the Panic of 1890. While recovery from this incident was swift, it destroyed the company's former bravado. Its new, restrained manner made it a more appropriate representative of the British establishment, and the company established ties with King George V, beginning a close relationship with the British monarchy that would endure until Barings' collapse. The descendants of the original five male branches of the Baring family were all appointed to the peerage with the titles Baron Revelstoke, Earl of Northbrook, Baron Ashburton, Baron Howick of Glendale and Earl of Cromer. The company's restraint during this period would cost it its preeminence in the world of finance, but would later pay dividends when its refusal to take a chance on financing Germany's recovery from World War I saved it the painful losses experienced by other British banks at the onset of the Great Depression. Underwriting refers to the process that a large financial service provider takes a dump on your face and then uses it to assess the process of providing access to their product like providing equity capital, insurance or credit to a customer. ... Headquarters London Governor Mervyn King Central Bank of United Kingdom Currency Pound Sterling ISO 4217 Code GBP Base borrowing rate 5. ... William Lidderdale (July 16, 1832 - June 26, 1902) was a British merchant, and governor of the Bank of England between 1889 and 1892. ... The Panic of 1890 was an acute depression that was less serious than other panics of the era precipitated by the near insolvency of the Baring Brothers bank in London due mainly to poor investements in Argentina. ... George V (George Frederick Ernest Albert; 3 June 1865 - 20 January 1936) was the first British monarch belonging to the House of Windsor, as a result of his creating it from the British branch of the House of Saxe-Coburg-Gotha. ... The British monarch or Sovereign is the head of state of the United Kingdom and in the British overseas territories. ... For other uses, see Peerage (disambiguation). ... Baron Revelstoke is a peerage title in the Peerage of the United Kingdom. ... Baron Northbrook is a title in the Peerage of the United Kingdom. ... Baron Ashburton is a title that has been created in both the Peerage of Great Britain and the Peerage of the United Kingdom. ... Baron Howick of Glendale is a peerage title in the Peerage of the United Kingdom. ... The title of Earl of Cromer was created in the Peerage of the United Kingdom in 1901 for Evelyn Baring, 1st Viscount Cromer, the long-time British Consul-General in Egypt. ... This article is becoming very long. ... The Great Depression was a time of economic down turn, which started after the stock market crash on October 29, 1929, known as Black Tuesday. ...


Events leading to Barings Bank's collapse

Barings Bank's activities in Singapore between 1992 and 1995 enabled Nick Leeson to operate effectively without supervision from Barings Bank in London. Leeson acted both as head of settlement operations (charged with ensuring accurate accounting) and as floor manager for Barings' trading on Singapore International Monetary Exchange, or SIMEX. This placed Leeson in the position of reporting to an office inside Barings Bank which he himself held. SIMEX is the Singapore Monetary Exchange, a stock trading institution in Singapore. ...


Because of the absence of oversight, Leeson was able to make seemingly small gambles in the futures market and cover for his shortfalls by reporting losses as gains to Barings in London. Specifically, Leeson altered the branch's error account, subsequently known by its account number 88888 as the "five-eights account", to prevent the London office from receiving the standard daily reports on trading, price, and status.


Using the hidden "five-eights account," Leeson began to agressively trade in futures and options on SIMEX. His decisions routinely lost substantial sums, but he used money entrusted to the bank by subsidiaries for use in their own accounts. He falsifed trading records in the bank's computer systems, and used money intended for margin payments on other trading.


Barings Bank management in London at first congratulated and rewarded Leeson for what seemed to be his outstanding trading profits. After two years of steady losses covered up by the unknown "five-eights" error account, Barings Bank auditors finally discovered the fraud, but it was too late. Nick Leeson's activities had generated losses totaling £830 million. [2] Barings collapsed on February 26, 1995. ISO 4217 Code GBP User(s) United Kingdom, Crown Dependencies Inflation 3. ... February 26 is the 57th day of the year in the Gregorian calendar. ... 1995 (MCMXCV) was a common year starting on Sunday of the Gregorian calendar. ...


Barings was purchased by the Dutch bank/insurance company ING for the nominal sum of £1 along with assumption of all of Barings liabilities. Barings Bank therefore no longer has a separate corporate existence, although the Barings name still lived on as Baring Asset Management. BAM was split and sold by ING to MassMutual and Northern Trust in March 2005. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... ING House, ING headquarters in Amsterdam ING Groep N.V. (NYSE: ING, Euronext: INGA) (known as ING Group) is a financial institution of Dutch origin offering banking, insurance and asset management services. ... In the most general sense, a liability is anything that is a hinderance, or puts one at a disadvantage. ... MassMutual Financial Group, best known as the Massachusetts Mutual Life Insurance Company, is a major financial services corporation. ... Northern Trust Corporation NASDAQ: NTRS is a financial services company, headquartered in Chicago, providing fiduciary, banking and investment services for individuals and credit, operating, custody, trust and investment management services for organizations. ...


Nick Leeson's autobiography, covering the events leading up to the collapse, was dramatised in the movie Rogue Trader. Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World is a book by Nick Leeson, who served four years in prison for fraud after bankrupting the London-based Barings Bank in 1995 by hiding $1. ... Rogue Trader is a 1999 drama film directed by James Dearden. ...


References

  1. ^ Reason, James: Managing the Risks of Organizational Accidents, page 29. Ashgate Publishing Limited, 1997.
  2. ^ Reason, James: Managing the Risks of Organizational Accidents, pages 28 - 34. Ashgate Publishing Limited, 1997.

See also

Leonard Ingrams (1 September 1941 – 27 July 2005), merchant banker and opera festival founder/impresario. ... Managing director is the term used for the chief executive of many limited companies in the United Kingdom, Commonwealth and some other English speaking countries. ... Garsington Opera is an open air opera festival held each summer in the gardens of Garsington Manor, in the village of Garsington, near Oxford, England. ...

External links


  Results from FactBites:
 
Barings Bank - Wikipedia, the free encyclopedia (512 words)
Barings Bank, previously known as Baring Brothers and Co., was the oldest merchant banking company in England, having been founded in 1762 by Sir Francis Baring.
The descendants of the original five male branches of the Baring family were all appointed to the peerage with the titles Baron Revelstoke, Earl of Northbrook, Baron Ashburton, Baron Howick of Glendale and Earl of Cromer.
Barings was purchased by the Dutch bank/insurance company ING after its collapse for the nominal sum of £1 and assuming all of Barings liabilities, and therefore no longer has a separate corporate existence.
Barings Bank (141 words)
Barings Bank, previously known as Baring Brothers & Co., is the oldest merchant banking company in England, having been founded in 1762.
Baring collapsed on February 26, 1995, due to the activities of one trader, Nick Leeson, who lost $1.4 billion by gambling on the Tokyo Stock Exchange.
Barings was purchased by the Dutch bank/insurance company ING after its collapse and no longer has a separate corporate existence.
  More results at FactBites »

 
 

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