‘The Old Lady and the Alchemist’ or ‘The Collapse of Barings’

Abstract

First Johnson Matthey, then BCCI and now Barings. The Bank of England's growing list of regulatory failures is as alarming for ordinary investors as it is embarrassing for the Government. The Board of Banking Supervision's (BBS) Report into the collapse of Barings chaired by the Governor of the Bank of England, only adds to general incredulity. Gallantly refusing to criticise The Old Lady, it instead firmly passes the buck for the untimely demise of Britain's oldest merchant bank on to a 28‐year‐old rogue trader, Nick Leeson, and a 51‐year‐old senior manager at the Bank of England, Chris Thompson. If Leeson was the ‘active agent’ in the £827m downfall of Barings, then the Bank of England, as UK ‘lead regulator’ was certainly a passive contributor. But the Report, while tracing a detailed web of accountability at Barings, is striking for its failure to do the same at the Bank of England, preferring instead to gloss over critical issues such as why the Bank of England failed to overhaul its supervision of financial conglomerates. All in all, it serves as damning testimony to the perpetuation of the ‘culture of complacency’ existing within the Bank, and does little to enhance public confidence that lightning will not strike twice.

Citation

Sarker, R. (1995), "‘The Old Lady and the Alchemist’ or ‘The Collapse of Barings’", Journal of Financial Crime, Vol. 3 No. 2, pp. 159-162. https://doi.org/10.1108/eb025698