Breakdown of Risk Controls at Barings Bank
The collapse of Baring’s Bank in 1995 occurred principally as a result of huge losses that resulted from unauthorized derivatives trading activity by the head of the Singapore office, Nick Leeson.[1] The chain of events that led to the collapse of the bank could have been mitigated, if not entirely avoided, had management and/or the board of directors followed recommendations contained in internal reports that drew attention to the risks present in the highly leveraged trading program constructed by Nick Leeson, or by more thoroughly questioning the exorbitantly large profits being regularly reported by the relatively small Singapore office. The Nick Leeson case must be considered a textbook example of the perils of concentrating unchecked power in the hands of a single individual, and serves as a backdrop for a discussion of the roles of ethics in the business world, and the role of the board of directors in ensuring that the interests of shareholders and other stakeholders are respected. In this paper I will examine 3 things:
First, what legal actions could be taken against Nick Leeson, and against others implicated in this case, by whom, and explain how I would reach a decision on these actions.
Second, I will examine the Nick Leeson case from an ethical perspective. I will undertake a discussion of this case against the backdrop of the most popular ethical framework (Utilitarianism), contrast this view with reference to Egoisim, and then outline what Nick Leeson ought to have done to act with more integrity.
Finally, I will discuss what role the board of directors could and should have played in overseeing the operations of Barings.
Legal Recourse and Action Let us begin by first examining the legal implications and ramifications surrounding the peripheral players in the Baring’s Bank case. This includes the office staff in the Singapore office of Barings (beside Nick Leeson), the management team of Baring’s derivatives program located in London, and
First, what legal actions could be taken against Nick Leeson, and against others implicated in this case, by whom, and explain how I would reach a decision on these actions.
Second, I will examine the Nick Leeson case from an ethical perspective. I will undertake a discussion of this case against the backdrop of the most popular ethical framework (Utilitarianism), contrast this view with reference to Egoisim, and then outline what Nick Leeson ought to have done to act with more integrity.
Finally, I will discuss what role the board of directors could and should have played in overseeing the operations of Barings.
Legal Recourse and Action Let us begin by first examining the legal implications and ramifications surrounding the peripheral players in the Baring’s Bank case. This includes the office staff in the Singapore office of Barings (beside Nick Leeson), the management team of Baring’s derivatives program located in London, and