The Event of Barings Bank Collapse

Prepared by:Qurrat-ul-AinMaseel-e-zehraNimrah sharifGhosia FaaroquiSarah Zubair

The CollapseBarings was brought down in 1995 due to unauthorized trading by its head derivatives trader in Singapore, Nick Leeson.

At the time of the massive trading loss, Leeson was supposed to be arbitraging, seeking to profit from differences in the prices from Osaka Securities Exchange in Japan and the Singapore International Monetary Exchange(SIMX).

Leeson bought on one market then held on to the contract, gambling on the future direction of the Japanese markets.

The five eight account

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 for 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"

The discovery

On 23 February 1995, Barings Bank auditors finally discovered the fraud, when Peter Baring, received a confession note from Leeson. Leeson's activities had generated losses of total £827 million (US$1.3 billion), twice the bank's available trading capital

The final outcome

Leeson was sentenced by the Singapore Court  for 6 years and 6 months imprisonment in 1995.

The Barings bank was declared bankrupt and was bought by a ING a Dutch Bank.