Scribd Logo
Upload

Welcome to Scribd!

  • 6K views

    Case Study - Barings Bank and Nick Leeson

    Uploaded by

    aladhari
    Nick Leeson hid escalating trading losses at Barings Bank through fictional accounts, reaching over $1.3 billion. As his losses mounted, the bank discussed expanding his market share instead of increasing oversight. Eventually, Leeson's trades exceeded liquidity constraints, revealing the losses. Barings collapsed and Leeson went to jail. The case shows how lack of risk management and incentives for risk-taking can lead organizations astray.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Case Study - Barings Bank and Nick Leeson

    Uploaded by

    aladhari
    6K views1 page
    Nick Leeson hid escalating trading losses at Barings Bank through fictional accounts, reaching over $1.3 billion. As his losses mounted, the bank discussed expanding his market share instead of increasing oversight. Eventually, Leeson's trades exceeded liquidity constraints, revealing the losses. Barings collapsed and Leeson went to jail. The case shows how lack of risk management and incentives for risk-taking can lead organizations astray.

    Original Description:

    This PDF is about how only one man collapse a 230-year old Barings Bank.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Nick Leeson hid escalating trading losses at Barings Bank through fictional accounts, reaching over $1.3 billion. As his losses mounted, the bank discussed expanding his market share instead of increasing oversight. Eventually, Leeson's trades exceeded liquidity constraints, revealing the losses. Barings collapsed and Leeson went to jail. The case shows how lack of risk management and incentives for risk-taking can lead organizations astray.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6K views1 page

    Case Study - Barings Bank and Nick Leeson

    Uploaded by

    aladhari
    Nick Leeson hid escalating trading losses at Barings Bank through fictional accounts, reaching over $1.3 billion. As his losses mounted, the bank discussed expanding his market share instead of increasing oversight. Eventually, Leeson's trades exceeded liquidity constraints, revealing the losses. Barings collapsed and Leeson went to jail. The case shows how lack of risk management and incentives for risk-taking can lead organizations astray.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Case Study: Nick Leeson and Barings Bank

    Perhaps romanticized through its foreign intrigue positions, waiting for the market turnaround that
    and visions of a rogue trader fleeing to would more quickly return his trades to
    international waters on his yacht, the case of profitability.
    Nick Leeson and Barings is simply one of a
    system that failed to align corporate risk taking Leeson was able to hide his losses, because he
    goals with incented and implicitly “approved” controlled and cheated the reporting system from
    behavior. his office. To keep his secret from management,
    he created a fictional trading account #88888 in
    Leeson had escalating risks and hidden losses which he could place offsetting trades that
    (over US$1.3 billion) that took down the oldest seemed profitable. The losses became so large
    bank in England. The demise ultimately came that he had to resort to taking activities
    from excessive trading positions, which came “underground”.
    about from a sense of ‘approval’ of his trading
    activity that came about because of the lack of Ultimately, while he was able to beat internal
    management discovery about his initial losses systems, when he reached the real-world
    and that in the middle of the mounting real liquidity constraints from his counterparties, he
    losses, the Barings Board discussed what steps faced an end to the game and so too did his
    they might take to protect Leeson’s market share employer.
    from their competitors, not how they might
    provide better oversight to his office. Barings was shut and Leeson went to jail.

    Humans have been demonstrated to show an


    extraordinary tendency towards loss avoidance.
    We don’t want to realize losses, so we tend to let About Us
    them build. It is a widely known oddity of
    probability theory that in a fair game, if you keep Ductilibility is private advisory service. We
    doubling your bets, you will always come out provide benchmarking research through our
    ahead. Yet, unlike trading houses and banks, this Research Circles. We design risk education
    mathematics game is not constrained by liquidity and risk-awareness-building programs. We
    or capital. review and analyze compensation and
    incentive structures for alignment with
    As losses on previous trades mounted, Mr. corporate objectives.
    Leeson kept increasing the size of his trading

    t) +1-612-387-8069 • e) [email protected] • w) http://www.ductilibility.com

     2008 David R. Koenig, All Rights Reserved

    You might also like