Barings Bank
| Barings Bank | |
|---|---|
| legal form | plc. |
| founding | 1717 |
| resolution | 1995 |
| Reason for dissolution | Insolvency. Taken over by ING for £ 1 . |
| Seat | London , UK |
| Branch | Finance industry |
The Barings Bank was a British investment bank .
Beginnings
Its roots lay in a trading business founded in 1717 by the Bremen merchant Johann Baring (1697–1748) in Exeter . His sons settled in 1762 by London over and founded the company John & Francis Baring & Co . Barings became London's leading bank alongside Rothschild in the 19th century .
The company, which was renamed Baring Brothers and Company in 1806, began to increasingly finance government activities. In 1803 the bank financed the US purchase of Louisiana . Baring helped the British government finance the Napoleonic Wars and in the following decades acquired extensive business with the French and Russian governments.
The great panic of 1890
From 1880, the bank invested extensively in South American companies and issued bonds to South American countries, especially Argentina . However, after commodity prices fell sharply in the course of 1890, Argentina could no longer repay its foreign debt by the end of 1890 - Baring thus owned worthless Argentine bonds worth £ 21 million. In the following years, the Bank of England, under the leadership of William Lidderdale , who feared profound consequences for the overall economy of the Empire , managed to form a consortium of over 100 banks and individuals that raised enough capital to cover the liabilities of the Baring Brothers and Company to satisfy. The bank declared bankruptcy and the bankruptcy estate immediately became Baring Brothers & Co. Ltd. newly founded as a stock corporation that took over a large part of the previous business. However, the consequence of the Baring Crisis was a significant reduction in British foreign credit, which contributed to economic crises in South Africa , Australia and the USA in 1893 .
Collapse in 1995
Risky and unauthorized interest rate and index speculation by futures trader Nick Leeson in Singapore resulted in a loss of 1.4 billion US dollars on February 26, 1995, and the bankruptcy of Barings Plc. The Dutch ING Groep then acquired the company on March 6, 1995 for a symbolic British pound and until 2005 ran parts of its investment banking business under the ING Barings brand . In 2005 ING Barings was spun off as a separate company and sold to the American life insurer Massachusetts Mutual Life Insurance Company under the name Baring Asset Management .
Lessons from the 1995 collapse
Therefore, the fall of Barings Bank serves today as a textbook example of poor organizational structure , since the lack of cooperation between the front office , handling (back office) and financial risk control favored the economic collapse of that bank. With reference to this case, which is also widely discussed in public, companies that are active in the field of derivative financial instruments but do not count among the financial institutions have established a strict separation between front office and back office and, since the late 1990s, increasingly have financial risk controlling established.
See also
literature
- Philip Ziegler: The Sixth Great Power: A History of One of the Greatest of All Banking Families, the House of Barings, 1762-1929 . New York, 1988
- Nick Leeson, Edward Whitley: High Speed Money. The billion game. How I ruined the Barings Bank , 1999
Web links
- Early documents and newspaper articles on Barings Bank in the 20th Century press kit of the ZBW - Leibniz Information Center for Economics .
Individual evidence
- ^ A stock exchange yuppie , Der Spiegel, Issue 7/1996 of February 12, 1996, page 103, accessed on March 6, 2011
- ↑ ING ends link with Baring name , BBC News, accessed March 18, 2017
- ^ Mass Mutual to buy part of Barings business , The Boston Globe, accessed March 18, 2017