The story started only because one of Nick's traders bought 20 lots for Fuji Bank and sold 20 lots by mistake, losing £20,000 outright. So Nick prepares to sell when the market turns bad, thinking that as long as he can make ends meet at the end of the month, it will be fine. So use your own account to buy and sell until you cover the loss, and then use the customer's next month's profit to fill the customer. After that, Nick's friend made the same mistake. Nick signaled that he had bought all the 100 September futures he sold, worth as much as £80 million, and the vouchers for several transactions were not filled out at all. In order to make enough money to cover all the losses, Nick took more and more risk, engaging in a large number of straddle positions. In the end, the bigger the bet, the deeper the sink. Due to Nick's misjudgment of the direction of the Japanese stock market, Barings Bank eventually collapsed.
Analyzing Nick, in fact, he did not make any profit from the 88888 account during the whole period. He did this more to protect the jobs of the staff in the Singapore branch and to be pressured by the company's profit requirements. So a lot of the blame lies with Barings itself.
For the Singapore supervisor and the personnel dispatched by the UK head office, Nick was able to conceal the shortfall perfectly for a long period of time, and it continued to expand until it became a bottomless pit. In addition to his good adaptability and luck, he had to One wonders to what extent Barings has been negligent in supervising its employees. As Barings Bank, the executives did not know that Nick was engaged in unauthorized business, but for the sake of fame and profit, they condoned Nick's behavior and avoided this issue. In this case, even if there is no Nick Leeson, there will be the loopholes of Sen 1, Sen 2, and Sen N diamond companies to bring down Barings Bank. In fact, like Nick, they couldn't overcome the gambling in their hearts. It’s okay to win the bet, everyone is profitable and has money to share, and Nick’s illegal operations will also be sheltered by the high-level, but if the bet is lost, in the end, things get bigger and bigger and can’t be controlled. It's like corrupt officials. When you first started taking bribes, there was a fluke mentality. Although there were fears, but no one found out, you became more and more presumptuous, and your appetite became bigger and bigger. The amount at the beginning was only a small amount. Little trouble. So everyone must maintain their own principles and bottom lines. It has been investigated before that people majoring in finance and economics have the highest average salary after joining the job, but the crime rate is also the highest, so they must be frank and worthy of their conscience!
In addition to some emotional things, it is still to analyze the reasons for the failure of Barings Bank and how to avoid the failure of Barings Bank, because it is the assignment assigned by the teacher-
(1) Poor internal management and lack of risk prevention mechanism. A scientific and effective risk control system should be established.
Nick is both the head of the clearing department and the head of the transaction department, with two positions, which shows that the internal management of Barings Bank is extremely lax. At the same time, Barings does not have a risk control inspection agency to audit its transactions. The management of Barings Bank knew that Nick was still increasing his position after the earthquake in Japan, but continued to transfer more than US$1 billion of funds to the Singapore branch from January to February 1995, which fully shows that Barings Bank is weak in risk awareness. The establishment of the Singapore branch of Barings Bank also lacked careful consideration in the organizational form. If it was registered as a wholly-owned subsidiary instead of a branch, it would not incur the consequences of the annihilation of Barings Bank.
(2) There are regulatory loopholes in the Singapore International Financial Exchange. The intensity and transparency of supervision should be enhanced.
Open interest in futures contracts held by the Singapore branch of Barings Bank accounts for one-third of the total open interest in the entire market. A single brokerage behavior occupies such a large market share, and the Singapore Exchange has not taken measures to stop it, and there are obvious regulatory loopholes.
(3) Excessive engagement in futures speculative trading. All institutions that operate prudently should strictly control the investment scale of derivative products and improve the internal control mechanism. Many investment derivatives have suffered catastrophes because of excessive speculation beyond their financial capacity.
(4) Strengthen the professional ethics of employees
View more about Rogue Trader reviews
