Barings Bank
Barings Bank Collapse
Estimated impact: $1.3B
Nick Leeson, a derivatives trader in Barings' Singapore office, accumulated $1.3 billion in hidden losses through unauthorized speculative trades on Nikkei futures. The 233-year-old bank collapsed when the losses were discovered, as management had granted Leeson unsupervised authority over both trading and settlement.
Decision context
Whether to maintain Leeson's dual role overseeing both trading execution and back-office settlement without independent oversight.
Biases present in the decision
Toxic combinations
- Yes Committee
- Doubling Down
Reference class base rates
Across all 146 curated case studies in our library:
Lessons learned
- Separation of duties between trading and settlement is a non-negotiable control; combining them invites fraud.
- Authority bias led management to trust a profitable trader without questioning the source of returns.
- Remote offices with insufficient oversight can become vectors for catastrophic risk accumulation.
Source: Bank of England Board of Banking Supervision Report on Barings (1995) (Case Study)
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