Editing Barings Bank (section)

===1992–1995===
Barings was brought down in 1995 by a massive trading loss caused by fraudulent trading by its head [[Derivative (finance)|derivatives]] trader in [[Singapore]] since 1992, [[Nick Leeson]]. Leeson was supposed to be [[arbitrage|arbitraging]], seeking to profit from differences in the prices of [[Nikkei 225]] futures contracts listed on the [[Osaka Securities Exchange]] in Japan and on the [[Singapore International Monetary Exchange]] (SIMEX). However, instead of buying on behalf of clients on one market and immediately selling on another market for a small profit, using the strategy approved by his superiors, Leeson started undertaking such trades using the bank's own money, gambling on the future direction of the Japanese markets.<ref>{{cite news|url=https://moneyweek.com/economy/people/601565/nick-leeson-the-man-who-broke-barings-bank|title=Nick Leeson: the man who broke Barings Bank|date=1 July 2020|newspaper=Money Week|access-date=11 December 2022}}</ref>

According to [[Edward George, Baron George|Eddie George]], Governor of the [[Bank of England]], Leeson began doing this at the end of January 1992. Due to a series of internal and external events, his unhedged losses escalated rapidly.<ref>{{Cite news
  |title=A Fallen Star
  | newspaper=[[The Economist]]
  |volume=334
  |issue=7904
  |pages=19–21
  |date=4 March 1995
|url=http://web.ebscohost.com/ehost/detail?vid=1&hid=13&sid=c651ab37-4191-4bf3-a275-e23e6ef543f7%40sessionmgr9
  }}</ref>

====Internal control====
Leeson was general manager for Barings' trading on SIMEX. Barings circumvented normal accounting, internal control and audit safeguards by making Leeson head of settlement operations for SIMEX, charged with ensuring accurate accounting for the unit. These positions would normally have been held by different employees. With authority to settle his own trades, Leeson was able to operate with no supervision from London—an arrangement that made it easier for him to hide his losses.<ref name="sungard">{{cite web
 |url=http://www.erisk.com/Learning/CaseStudies/Barings.asp 
 |title=Case Study : Barings 
 |publisher=Sungard Bancware Erisk 
 |access-date=18 November 2007 
 |archive-url=https://web.archive.org/web/20071017041450/http://www.erisk.com/Learning/CaseStudies/Barings.asp 
 |archive-date=17 October 2007 |url-status=dead 
}}</ref> After the collapse, several observers placed much of the blame on the bank's own deficient internal control and risk management practices. A number of people had raised concerns over Leeson's activities but were ignored.<ref>{{cite web|url=http://riskencyclopedia.com/articles/barings_debacle/|title=Barings debacle|publisher=Risk Encyclopedia|url-status=dead|archive-url=https://web.archive.org/web/20140703235630/http://riskencyclopedia.com/articles/barings_debacle/|archive-date=3 July 2014}}</ref>

====Corruption====
Because of the absence of oversight, Leeson was able to make seemingly small gambles in the futures [[arbitrage]] market at Barings Futures Singapore and cover up 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. Leeson claimed the losses started when one of his colleagues bought 20 contracts when she should have sold them, costing Barings £20,000.<ref>{{cite news|date=24 February 1996|title=The man who broke the queen's bank|newspaper=[[The Irish Times]]|url=https://www.irishtimes.com/news/the-man-who-broke-the-queen-s-bank-1.31807}}</ref><ref>{{cite news|date=19 August 2012|title=Barings rogue trader Nick Leeson: 'Money is not my motivation'|newspaper=[[The Daily Telegraph]]|url=https://www.telegraph.co.uk/finance/personalfinance/fameandfortune/9483379/Barings-rogue-trader-Nick-Leeson-Money-is-not-my-motivation.html}}</ref>

By December 1994, Leeson had cost Barings £200 million. He reported to [[HMRC|British tax authorities]] a £102 million profit. If the company had uncovered his true financial dealings then, collapse might have been avoided as Barings still had £350 million of capital.<ref name="investig">{{cite web
 |year=1995 
 |url=http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_nov95/bu_1195_1.pdf 
 |title=Implications of the Barings Collapse for Bank Supervisors 
 |publisher=Reserve Bank of Australia 
 |access-date=18 November 2007 
 |archive-url=https://web.archive.org/web/20070901054955/http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_nov95/bu_1195_1.pdf 
 |archive-date=1 September 2007 
 |url-status=dead 
}}</ref>

====Kobe earthquake====
Using the hidden five-eights account, Leeson began to trade aggressively in futures and options on SIMEX. His decisions routinely resulted in losses of substantial sums and he used money entrusted to the bank by subsidiaries for use in their own accounts. He falsified trading records in the bank's computer systems and used money intended for margin payments on other trading. As a result, he appeared to be making substantial profits.  However, his luck ran out when the [[Great Hanshin earthquake|Kobe earthquake]] upset the Asian financial markets—and with them, Leeson's investments. Leeson bet on a rapid recovery by the Nikkei, which failed to materialise.<ref name="time">{{cite magazine|author=Howard Chua-Eoan |year=2007 |url=http://www.time.com/time/2007/crimes/18.html |title=The Collapse of oBarings Bank, 1995 |magazine=[[Time (magazine)|Time]] |access-date=18 November 2007 |url-status=dead |archive-url=https://web.archive.org/web/20071116030228/http://www.time.com/time/2007/crimes/18.html |archive-date=16 November 2007 }}</ref>

====Discovery====
On 23 February 1995, Leeson left Singapore to fly to [[Kuala Lumpur]]. Barings Bank auditors discovered the fraud around the time that Barings' chairman Peter Baring received a confession note from Leeson. Leeson's activities had generated losses totalling £827 million ($1.3 billion), twice the bank's available trading capital. The collapse cost another £100 million.<ref name="investig"/> The Bank of England attempted an unsuccessful weekend bailout,<ref name="JamesReason">{{cite book|last=Reason|first=James|year=1997|title=Managing the Risks of Organizational Accidents|publisher=Ashgate Publishing Limited|pages=28–34}}</ref> and employees around the world did not receive their bonuses. Barings was declared insolvent on 26 February 1995, and administrators began managing the finances of Barings Group and its subsidiaries.<ref name="Report"/> The same day, the Board of Banking Supervision of the Bank of England launched an investigation led by Britain's Chancellor of the Exchequer; its report was released on 18 July 1995.<ref name="Report">{{cite web|url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/235622/0673.pdf|title=Return to an order of the Honourable the House of Commons dated 18 July 1995 for the Report of the Board of Banking Supervision inquiry into the circumstances of the collapse of Barings|location=London|publisher=HMSO|date=18 July 1995|access-date=25 February 2021}}</ref> Leeson was captured in Frankfurt on 2 March and extradited to Singapore on 23 November, 272 days after fleeing.  He was sentenced to six years and six months imprisonment, served in Singapore's [[Changi Prison]], for his wrongdoings.<ref>{{Cite web|title=Guilty As Charged: Rogue trader Nick Leeson brought down Britain's oldest merchant bank Barings|url=https://www.straitstimes.com/singapore/courts-crime/guilty-as-charged-rogue-trader-nick-leeson-brought-down-britains-oldest|date=15 May 2016|access-date=30 October 2021|website=The Straits Times}}</ref>

====Aftermath====
Dutch bank [[ING Group|ING]] purchased Barings Bank in 1995 for the nominal sum of £1<ref name="time"/> and took over all of Barings' liabilities, forming the subsidiary ING Barings. In 2001, ING sold the US-based operations to [[ABN Amro]] for $275 million and folded the rest of ING Barings into its European banking division.<ref name="amrosale">{{cite news |url=https://www.nytimes.com/2001/01/31/business/world-business-briefing-europe-more-restructuring-by-ing-group.html |title=World Business Briefing: Europe; More Restructuring by ING Group |last=Kapner |first=Suzanne |date=31 January 2001 |access-date=26 November 2007 |work=The New York Times}}</ref> This left only the asset management division, [[Barings Asset Management|Baring Asset Management]]. In March 2005, BAM was split and sold by ING to [[MassMutual]], which acquired BAM's investment management activities and the rights to use the Baring Asset Management name, and [[Northern Trust]], which acquired BAM's Financial Services Group.<ref name="bamsplit">{{cite web |url=http://www.ing.com/group/showdoc.jsp?menopt=&docid=092370_EN&lang=en|title=ING Group agrees to sell Baring Asset Management |date=22 November 2004 |access-date=26 November 2007 |publisher=ING Group| archive-url= https://web.archive.org/web/20071210170734/http://www.ing.com/group/showdoc.jsp?menopt=&docid=092370_EN&lang=en| archive-date= 10 December 2007 | url-status= live}}</ref><ref name="bbcbamsplit">{{cite news|url=http://news.bbc.co.uk/1/hi/business/4031649.stm |title=ING ends link with Baring name  |date=22 November 2004 |access-date=26 November 2007 |work=BBC News| archive-url= https://web.archive.org/web/20071023215653/http://news.bbc.co.uk/1/hi/business/4031649.stm| archive-date= 23 October 2007 | url-status= live}}</ref> Barings Bank no longer has a separate corporate existence, although the ''Barings'' name still lives on as the MassMutual subsidiary Baring Asset Management.<ref>{{cite web|url=http://www.baring-asset.com/code/uk/index.hcst|title=Baring Asset Management|access-date=2008-01-02|archive-date=2007-12-27|archive-url=https://web.archive.org/web/20071227184721/http://www.baring-asset.com/code/uk/index.hcst|url-status=dead}}</ref> In March 2016, a merger was announced with other asset management subsidiaries of MassMutual, creating a new "Barings" headquartered in Charlotte, NC.<ref>{{cite web|url=http://www.barings.com/news/press-releases/massmutuals-institutional-asset-management-affiliates-babson-barings-cornerstone-and-wood-creek-announce-plans-to-combine|title=Mass Mutual Asset Management Affiliates Announce Plans to Combine|date=March 2016|access-date=2017-10-31|archive-date=2017-11-07|archive-url=https://web.archive.org/web/20171107012745/http://www.barings.com/news/press-releases/massmutuals-institutional-asset-management-affiliates-babson-barings-cornerstone-and-wood-creek-announce-plans-to-combine|url-status=dead}}</ref> Baring Private Equity International was acquired by its respective management teams, which today include [[Baring Vostok Capital Partners]] in Russia, [[GP Investments]] in Brazil, [[Baring Private Equity Asia]]<ref>{{cite web|url=http://www.bpeasia.com/|title=Home|date=23 August 2015|website=bpeasia.com}}</ref> and Baring Private Equity Partners India.<ref>{{cite web|url=http://www.bpepindia.com/|title=Baring Private Equity Partners India|first=Baring Private Equity Partners|last=India|website=www.bpepindia.com}}</ref>