Barings Bank

The Barings Bank was a British investment bank.

Its roots lay in a 1717 by the Bremen merchant Johann Baring ( 1697-1748 ) in Exeter founded trading business. Whose sons settled in 1762 to London, where they founded the company John & Francis Baring & Co. Barings was in the 19th century next to Rothschild for leading London bank.

The 1806 renamed it Baring Brothers and Company company now began increasingly to finance government activities. 1803 the Bank financed the purchase of Louisiana by the United States. Baring helped the British government in the financing of the Napoleonic wars and acquired in the following decades, extensive transactions with the French and Russian government.

The great panic 1890

From 1880, the Bank invested heavily in South African companies and forgave loans to South American countries, especially in Argentina. After the commodity prices, however, had greatly softened over the year 1890, Argentina was able to pay back the end of 1890 its foreign debt no longer - so had Baring worthless Argentine bonds worth 21 million pounds. In the following period, the bank of England under the direction of William Lidderdale who feared profound implications for the overall economy of the Empire to form a consortium of over 100 banks and individuals that could cope with enough capital to cover the liabilities of the Baring Brothers and Company to satisfy. The bank filed for bankruptcy, and from the bankrupt was immediately out the Baring Brothers & Co. Ltd.. refounded as a corporation, which took over a large part of the existing business. However, the result of the Baring crisis was a significant reduction in the British foreign loans, which contributed to 1893 economic crises in South Africa, Australia and the USA.

Collapse in 1995

Risky and unauthorized interest rate and index futures trader Nick Leeson of speculation in Singapore led on February 26, 1995 to a loss of 1.4 billion U.S. dollars, the bankruptcy of Barings Plc. The Dutch bank ING Groep acquired then on 6 March 1995, the company for a symbolic Pound Sterling and since then exports part of its investment banking business under the brand ING Barings. Some observers of the collapse of Barings with the bankers in circles alleged excessive use of cocaine was correlated.

The lesson from the case of Barings Bank

Therefore, the case of Barings Bank still serves as a textbook example of a poor organizational structure, since the lack of cooperation between the front office, processing ( back office ) and financial risk control favored the economic collapse of that bank. With reference to this case in the public widely discussed a strict separation between front office and back office were also in companies that are specifically in the area of derivative financial instruments actively, but do not count on financial institutions, set up and since the late 1990s, becoming a real financial risk control established.