Barings Bank

About Barings Bank

Barings Bank, the oldest merchant bank in London, collapsed in February 1995 after trader Nick Leeson lost 827 million on unauthorized derivatives trades in Singapore. Leeson was a 28 year old trader who operated on the Singapore International Monetary Exchange. He concealed losses in a secret error account numbered 88888. Leeson sold straddles on the Nikkei 225 index, a strategy that profits from stability but suffers catastrophic losses in volatile markets. The Kobe earthquake on January 17, 1995 caused the Nikkei to plummet. Leeson fled Singapore but was arrested in Frankfurt. He was sentenced to six and a half years in Singapore prison. Barings was sold to ING for 1. Leeson wrote a book about his experiences called Rogue Trader. The collapse demonstrated the risks of inadequate internal controls and unauthorized trading.