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Barings Bank Investigation

1995Bank of England£827 Million Loss

As part of Arthur Andersen specialist investigation team, I contributed to the comprehensive investigation commissioned by the Bank of England into one of the most significant banking collapses of the 20th century.

investigation_overview.txt

Investigation Overview

The Crisis

  • • Barings Bank declared insolvent on February 26, 1995
  • • Total losses of £827 million ($1.3 billion)
  • • Caused by unauthorized trading by Nick Leeson in Singapore
  • • Losses were twice the bank available trading capital
  • • 233-year-old merchant bank collapsed overnight

Investigation Team

  • • Bank of England Board of Banking Supervision
  • • Arthur Andersen specialist investigation unit
  • • JP Morgan derivatives and risk management experts
  • • Legal representatives and regulatory specialists
  • • Investigation launched the day after collapse

Key Findings

The investigation revealed virtual total failure of risk management systems and controls, and managerial confusion within the Barings Group. Critical discoveries included:

  • • Over £200 million in unrecognized losses at end of December 1994
  • • Cumulative losses grew to £827 million by February 27, 1995
  • • Complete breakdown of internal controls and risk monitoring
  • • Management failed to understand or control Singapore operations
  • • External auditors and regulators also missed warning signs
impact_and_legacy.txt

Impact & Legacy

1

Regulatory Reform

Led to major reforms in banking supervision and risk management across the UK financial system

2

Global Standards

Became textbook case study for risk management failures, influencing banking practices worldwide

3

Modern Controls

Investigation findings directly influenced development of modern operational risk management frameworks

methodology.txt

Investigation Methodology

Technical Analysis

Financial InvestigationRisk Management AnalysisRegulatory ComplianceBanking OperationsCrisis Management

Investigation Scope

  • • Analysis of trading positions and risk exposures
  • • Review of internal control systems and procedures
  • • Assessment of management oversight and governance
  • • Evaluation of regulatory supervision effectiveness
  • • Documentation of systematic control failures
references.txt

References & Further Reading

Official Bank of England Report

Report into the collapse of Barings Bank - UK Government

Implications of the Barings Collapse for Bank Supervisors

Reserve Bank of Australia analysis of regulatory implications

Britannica: Bankruptcy of Barings Bank

Comprehensive overview of the collapse and its significance