The Collapse of Barings [Hardcover]

Stephen Fay (Author)

Book Description

Publication Date: January 17, 1997

A true tale chronicling the diasatrous collision of old money and raw greed. In February 1995, the unthinkable happened: one of the oldest and most respected merchant banks in London went bankrupt. The story that "rogue" Barings trader Nick Leeson lost hundreds of millions of pounds speculating in the Far East was front-page news throughout the world. Accused of fraud on a massive scale, Leeson first strenuously opposed being tried in Singapore, then eventually was taken there from his prison in Frankfurt. In December 1995 he pleaded guilty - and the trial began and ended within two days. As a result, the prosecution case against Leeson was not heard. What really happened to cause the downfall of "the Queen's bank," and who was actually responsible?

In The Collapse of Barings, Stephen Fay investigates the facts behind the headlines and discovers a closed network of privilege, greed, and incompetence. In the rapidly changing system of global finance, the directors of Barings came to rely on people they hardly knew - like Nick Leeson - to make their fortunes in markets they did not fully understand, like SIMEX in Singapore. The plasterer's son from Watford was still in his mid-twenties when he rose to become the golden boy of Barings, claiming to have made profits of ten million dollars in one week. His London bosses watched passively as a culture of speculation grew until it eventually destroyed them, and changed the face of London's financial heartland.

Editorial Reviews

Amazon.com Review

Stephen Fay's book The Collapse of Barings joins a growing list of contemporary accounts of the banking scandal that brought down England's most prestigious investment bank. The financial calamity that Nicholas Leeson unleashed through his unauthorized trading was so grand in scope that the story seemed likely to be of great interest as well. A story about a "rogue trader" in Singapore who could destabilize finances worldwide and bring down the Queen's bank has so many angles worthy of exploration, from the character of Leeson to the technology that made it possible, from the history of Barings to the nature of global finance, that you can't blame writers for rushing in to chronicle it. But with Leeson's own tell-all tome Rogue Trader, and the excellent account Total Risk: Nick Leeson and the Fall of Barings Bank by Judith H. Rawnsley, as well as a fascinating chapter on the Barings scandal in Martin Meyer's book The Bankers: The Next Generation, the story has largely been told. Nevertheless, Stephen Fay is an excellent business writer, and his book is an adept study of Leeson and the damage he did to banking and Barings. Fay pays particular attention to the British reaction to the Barings collapse and uncovers anglophile angles previously overlooked. Those looking for another take on the Barings scandal or an exhaustive collection of Barings books will snatch this book up with no regrets.

From Publishers Weekly

Fay-a British journalist, financial editor and author of a book on the Bank of England-takes a close look at Barings Brothers, one of England's most prestigious banks (used by the Queen) and how it went bust after a young employee working out of its Singapore office managed to "lose" #860 million over 32 months without anyone apparently being the wiser. Fay gives a brisk history of the bank, founded in 1762, as well as a crash course on modern investment and speculation practices, with admirably understandable explanations of such terms as derivatives, short-straddle futures, swaps and cross-trading. He then turns to Nick Leeson, from a working-class suburban London family, who didn't have good enough grades to get into a university but who beat the speculators at their own game. He details, and documents, Leeson's complicated financial manipulations and argues that the trader's claim that he slipped into the scheme by accident, while putting right other people's mistakes, is untrue. Also covered are the shocking ineptness at Barings, the social divisions within the company, the confusion in financial circles after Leeson was caught in early 1995 and the inability of the Bank of England to save Barings. As a reporter, Fay is both concise and clear, and he has a nice eye for odd details, such as London's leading bankers meeting at the Bank of England in panic over the Barings collapse and sending out for pizza.
Copyright 1996 Reed Business Information, Inc.

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Product Details

• Hardcover: 320 pages
• Publisher: W.W. Norton & Co. (January 17, 1997)
• Language: English
• ISBN-10: 0393040550
• ISBN-13: 978-0393040555
• Product Dimensions: 9.4 x 6.2 x 1.2 inches
• Shipping Weight: 1.4 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #2,277,246 in Books (See Top 100 in Books)

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2 of 3 people found the following review helpful:

4.0 out of 5 stars Though fading into history, this story is still interesting to me..., October 11, 2005

By 

aseclyst (New Jersey) - See all my reviews

This review is from: The Collapse of Barings (Hardcover)

The story of Nick Leeson and the collapse of Barings happened 10 years ago, but it continues to hold my imagination. Perhaps I had been captivated by Barings' former mystique. Stephen Fay's book is well researched and may be the best of the "Barings" books (I have not yet read the others). It appears to be a well balanced account which takes in what (the hell) Leeson says he was up to and compares it against the official investigations, observations of others in the firm, and adds a dash of common sense, in an attempt to try to provide a total picture of the debacle.

One thread running through Fay's book is the weakness of Barings' control systems; the Bank was apparently attempting to enter the 21st century with 19th century risk management techniques. Another subtext is that a lot of the successful management alchemy that had driven Barings in its Victorian heyday had been bred out of the firm by the time Nick entered the picture, so that top executives lacked the necessary antennae to tune into or uncover the risks which Leeson was exposing them to. I admit there is a lot of strength to the argument that there was a lot of willful ignorance going on with all of Leeson's fake profits to prop up the bottom line, as Fay says:

"Greed is the easiest of the...motives to understand. In the old days, most of the Baring family - especially those who worked in the bank - were very comfortably off. Their motives were a blend of influence in [London], social position and a bit of public service. The clerks were not greedy because they were in no position to be. Big Bang in 1985 altered that, and the fast growth of derivatives markets in the late 1980s changed it beyond recognition. Having transferred their last shares to the Baring Foundation, the directors now relied on bonuses to earn good money. But much of the firm's profit now depended on the people who had once formed the function of the clerks."...like Leeson, who was on his way up from that station.

A strength of the Fay text is that it is completely devoid of a tabloid approach to the whole topic. There are not even any pictures, certainly not of Lisa Leeson in tears, unless you count Nick in handcuffs on the dust jacket (I am also excepting photocopies of memos and faxes, which are informative). This book is written with an organization that an auditor could love, and apprentices at the major securities trading firms of the world could do worse than read this book on their first day of employment.

Perhaps it doesn't matter looking back that the Bank of England failed to bail Barings out; I hope that the folk once employed there have gradually made their way in the world, I even hope the (still married?) Nick & Lisa have sorted out their lives. Barings seems like an antique, a fine piece of China that finally fell off a shelf and shattered. It could have been different, if Christopher Heath's trading culture had been better melded with the Bank's stuffy side; if they had, earlier on, spent GBP 10 million on that fancy new trading system called BRAINS (and figured out Nick before he figured out how to hack it); if they had roused themselves earlier to investigate various holes in their trading accounts and tracked down the origin of the SLK receivable. If only, if only, if only... Such are the decisions of life.