Barings Bank

From Free net encyclopedia

(Difference between revisions)

Revision as of 12:17, 4 April 2006
Ciphergoth (Talk | contribs)
summary should mention collapse, since it is now what Barings is best known for.
Next diff →

Current revision

Image:Barings.png

Barings Bank, previously known as Baring Brothers & Co., was the oldest merchant banking company in England, having been founded in 1762 by Sir Francis Baring. It collapsed in 1995 after one trader, Nick Leeson, lost $1.4 billion in speculation primarily on futures contracts.

1 History
2 Collapse
3 See also
4 External links

[edit]

History

Barings had a long and storied history. In 1802, it helped finance the Louisiana Purchase, despite the fact that Britain was at war with France, and the sale had the effect of financing Napoleon's war effort. Technically the United States did not buy Louisiana from Napoleon. Louisiana was bought from the Baring Brothers. The way it worked was that payment for the purchase was made in US bonds, which Napoleon sold to Baring at a discount of 87 1/2 per each $100. As a result, Napoleon received only $8,831,250 in cash for Louisiana. Alexander Baring conferred with the French Director of the Public Treasury François Barbé-Marbois in Paris, went to the United States to pick up the bonds and took them to France.

Later daring efforts in underwriting got the firm into serious trouble through overexposure to Argentine and Uruguayan debt, and the bank had to be rescued by a consortium organized by the governor of the Bank of England, William Lidderdale, in 1890. While recovery from this incident was swift, it destroyed the company's former bravado. Its new, restrained manner made it a more appropriate representative of the British establishment, and the company established ties with King George V, beginning a close relationship with the British monarchy that would endure until Barings' collapse. The descendents of the original five male branches of the Baring family were all appointed to the peerage with the titles Baron Revelstoke, Earl of Northbrook, Baron Ashburton, Baron Howick of Glendale and Earl of Cromer. The company's restraint during this period would cost it its preeminence in the world of finance, but would later pay dividends when its refusal to take a chance on financing Germany's recovery from World War I saved it the painful losses experienced by other British Banks at the onset of the Great Depression.

[edit]

Collapse

Barings collapsed on February 26, 1995, due to the activities of one trader, Nick Leeson, who lost $1.4 billion by speculating on the Singapore International Monetary Exchange, primarily using futures contracts. Barings was purchased by the Dutch bank/insurance company ING after its collapse for the nominal sum of £1 and assuming all of Barings liabilities, and therefore no longer has a separate corporate existence. Its name lived on for a while, as Baring Asset Management. But BAM was split and sold by ING to MassMutual and Northern Trust in March 2005.

Nick Leeson's autobiography of the events leading up to the collapse was dramatised in the movie Rogue Trader.

[edit]