The failure of banks is not unknown and over recent years there have been many cases of banks collapsing. The fall of Barings Bank in 1995 generated much publicity at the time, but it is now just another example alongside the likes of B.C.C.I. What is interesting is how the collapse actually happened. Surely one man could not solely be responsible for the fall of such a well-established institution? Within this essay the facts surrounding the collapse of Barings will be discussed as well as plausible reasons as to why it happened and possible lessons that can be learnt to perhaps prevent such cases occurring in the future.
At the time of the collapse, Baring Brothers & Co., Ltd (BB&Co) was the longest established merchant banking business in the City of London. Since the foundation of the business as a partnership in 1762 it had been privately controlled and had remained independent.
BB&CO was founded in 1890 to carry on the business of the bank in succession to the original partnership. In November 1985 Barings plc acquired the share capital of BB&CO and became the parent company of the Barings Group.
In addition to BB&CO, the other two principal operating companies of Barings plc were Barings Asset Management Limited (BAM), which provided a wide range of fund and asset management services, and Baring Securities Limited (BSL), itself a subsidiary of BB&CO, which generally operated through subsidiaries as a broker dealer in the Asia Pacific region, Japan, Latin America, London and New York.
Barings Futures Singapore (BFS), was an indirect subsidiary of BSL. BFS was originally formed to allow Barings to trade on the Singapore International Monetary Exchange. At the time of collapse BFS employed 23 staff. BSL's other significant Singaporean subsidiary was Baring Securities (Singapore) Pte Limited...