The story of the Barings is one of a rogue trader that alone caused the bankruptcy of a supposed solid bank.

This came at a big surprise and shock to everyone and especially to the finance industry as the phenomenal loss had been dissimulating for months fraudulently. Barings Bank was founded in London in 1763 which rose to become the Britains oldest Merchant Bank as well as becoming the leading Merchant Bank. As such, it provided traditional banking services to the public while performing investment activities in stocks, bonds, commodities and real estate. The bank focused in investment sector activities which could lead to success in trading on the future. By 1989, Barings had established trading operations at most of the worlds exchanges operating began in British Commonwealth countries and former British colonies. By being creative and flexible in crafting the financial solutions for organizations, Barings Bank enjoying grew up steadily over time across the globe. In February 1995, the bank was discovered in involving a huge fraud scheme, perpetrated by one of its traders in Singapore-Nick Leeson. He had wiped out the banks capital and destroyed the 220 year old institution. In 1989, Nick Leeson joined Baring Securities Ltd (BSL) and working primarily in the settlements department. In the mean time, he had applied to become a dealer with the Securities and Futures Authority (SFA) in London early 1992. After the first quarter of 1992, Leeson was posted to Baring Futures Singapore Ltd (BFS) to perform the settlement operations as well as the floor manager at the Singapore International Monetary Exchange (SIMEX). This is the beginning opportunity for Nick Leeson to bring down the Barings Bank due to the inconsistency of the risk management fundamental. Leeson was selected to open, run and manage the new operation in Singapore, managing all aspects of trading on SIMEX and he had been with the Barings Bank approximately three years and possessed a total of five years experience in banking. He was put in charge of operations for Barings Futures Singapore (BFS), with responsibilities both for trading and the accounting and settlement activities. As he was put in charge of operations for Barings Futures Singapore (BFS), with responsibilities both for trading and the accounting and settlement activities. These functions were not segregated because Leeson & his staff were expected to merely execute orders placed by other Barings Group companies on behalf of their external clients.Later in 1992 many Japanese institutional investors set up their own execution capability in Singapore. As a result, the external client business of Baring Securities Japan (BSJ) became less viable. To compensate for the loss of business, BSJ commenced

proprietary trading on behalf of the Barings Group. Leeson alone made about 10 million Pounds that year, which was about 10% of the bank profits of that year. Lessons only arbitrage trades, why were there no red flags waving and alarms sounding when Leeson reported such large profits? In 1993, Leesons office brought in about 20% of Barings worldwide profits, and during the first half of 1994, it was responsible for about 50% of the banks earnings. By yearend 1994, Leesons reported profits were 500% of his budgeted estimate.19 Instead of critical scrutiny, Barings management seems to have convinced itself that the source of the banks competitive advantage over rivals came from its simultaneous membership on the Japanese and Singapore exchanges. Management also seemed to have prided itself for having the wisdom to hire Leeson, the golden boy of arbitrage trading.