BARRINGS BANK

SHAFAHAD JAN

M SHAHZEB KHAN

(Hashmatullah)

What is a Bank???

Barings Bank
Barings Bank (1762 to 1995) was the oldest bank in London until its collapse in 1995. The bank was established in 1762 by two sons of German 1995 Was the end of 233 years old bank 4,000 employees Assets of $10 billion in 1994, Market of Asia, Latin America and Eastern Europe Its money management arm managed about $46 billion Customers, Queen of England. Talented corporate finance team Good connections in British industry. Re opening of trade with America. Helped US.

1995 the chairman was Peter Baring

COUNT..
Barings concentrated on the old-fashioned business. Securities trading arm (1984). Clash of cultures. Investment banking and securities operations.

Derivatives
A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

Conti

Currency. Commodity. Stock. Forward contract. Future contract.

Example of a derivative contract for a currency

Derivatives are generally used as an instrument to minimize risk, but can also be used for planning purposes. For example, a European investor purchasing shares of an American company of an American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into Euros.

Example of a derivative contract for a commodity

Consider A Company That Knows It Will Need To Purchase 1 Million Barrels Of Oil In Six Months. Imagine that the current price of oil is $15 per barrel, but the company fears that the price may rise substantially over the next six months because of turmoil in Saudi Arabia, the worlds largest oil exporting nation. The company can either wait or bear the risk that the price of oil might raise in six months, or it can enter into a futures contract today. Under this contract, it might agree to purchase the price of oil in six months at $16 per barrel. The $1 difference between the price of oil today and the price specified in the contract represents an insurance, or hedge, against a possible rise in the future price of oil. By entering into the contract, the company has reduced its exposure to future rises in oil prices; it has reduced its risk.

Example of a derivative contract for a stock

A stock option is a contract that gives the owner the right to purchase or sell a specific number of shares at a fixed price within a definite time. For example, imagine that you hold 1,000 shares of Compaq Computer, which is trading at $50 per share (the market value of your holding is $50,000). You fear that due to a temporary slowdown in the growth rate of personal computer sales, the price of Compaq might fall in the near future, but you dont want to sell the stock because you like Compaqs long-term prospects. You know that it is by no means a sure thing that sales are slowing, and Compaq could continue to do well even if sales do slow. You might decide to take out insurance against the possibility that the stock will fall by purchasing a put option.

PUT OPTION
Selling

CALL OPTION
BUYING, PURCHASING

NICK LEESON
27-year-old Englishman. Employed at the Singapore office of Britains oldest bank, Barings.

He was your average English guy who likes to go out for a beer after work, and sometimes has a few too many. I wouldnt have said anything negative about him.

RESIGNATIONS
Things came to ahead. ($20 million loss) Christopher Heath, the head of Barings Securities in 1992. Andrew Tuckey, the deputy chairman of Barings.

YOU MAY THINK?????

How is it possible that this one man was able to cripple a financial giant? What was the role of senior management in this situation and did they contribute to the demise? How effective were the internal control systems and was the Singapore operations managed effectively?

Nicholas Leeson The Rogue Trader

Worked for Morgan Stanley after graduating university. Hired as a relatively young clerk, he went to Barings' Singapore office in 1992. He was put in charge of operations for Barings Singapore Later in 1992 many Japanese institutional Leeson alone made about 10 million Pounds that year, which was about 10% of the bank profits of that year.