The Collapse Of Barings Bank Case Study

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If you own the copyright to this book and it is wrongfully on our website, we offer a simple DMCA procedure to remove your content from our site. Report copyright / DMCA form The Dynamics of Organizational Collapse ‘This book investigates the events from Nick Leeson’s employment with Barings in Singapore in 1992 to Barings’ collapse in 1995, generating valuable insights based on a high-level multi-theoretical analysis involving psychological and sociological theories. B35D78 2008 332.1′20941—dc22 2007028584 ISBN 0-203-93277-3 Master e-book ISBN ISBN10: 0-415-39961-0 (hbk) ISBN10: 0-203-93277-3 (ebk) ISBN13: 978-0-415-39961-6 (hbk) ISBN13: 978-0-203-93277-3 (ebk) For Gannon Drummond, William Drummond, Alexander Drummond and Dominic Drummond Contents Preface Principal actors Summary of key events Introduction xiii xiv xv 1 Aims of this book 2 Approach to analysis 4 Validity of sources 4 Structure 6 1 The paradox of consequences 9 Why do organizations exist?

Tony Railton instructed not to get involved in so-called ‘SLK transaction’ when he visits Singapore.

James Bax faxes Peter Norris, advising that Leeson will no longer be responsible for settling transactions.

Printout of account 88888 discovered lying on Leeson’s desk reveals thousands of unauthorized trades, all losing money. The daily reports they had received from him had been complete fiction.

[They] had met daily and solemnly discussed the profits and supposed tiny risks of Leeson’s trading. (All that Glitters, Gapper and Denton 1996: 29) On Thursday 23 February 1995 the directors of Barings Bank hosted a lunch for City magnates.Following Nick Leeson’s arrest and subsequent conviction for fraud, investment banks anxiously reviewed their risk management controls to make sure that it could never happen again. ’ 49 Suspense accounts 50 ‘Unthinkable in any other bank ... ’ 52 ‘Leeson has too much power and influence’ 54 ‘A significant general risk ... ’ 58 9 Analysis of Leeson’s early days 60 Legitimation 60 Towards domination 62 Beyond greed 62 10 Decision error Psychological and social influences 63 The psychology of loss 64 Social drivers of decision error 65 The missing hero 66 Organizational drivers of escalation 66 Organizations and entrapment 67 Values and purposes 70 Feeding the myth: organizational politics 70 Sense-making 71 63 Contents 11 ‘A million bucks a day’ xi 74 ‘This guy ...Helga Drummond’s exploration is conducted against a backdrop of social and psychological theories of decision error that seeks to go beyond media style accusations of greed and incompetence. is making a million bucks a day’ 75 ‘Nobody else to ask’ 78 ‘They wanted to believe it was all true ...The book will be of great interest to all those interested in social psychology, the application of psychology in management theory, sociology and organizational behaviour. I was then fortunate to be awarded a grant by the Economic and Science Research Council (ESRC) to delve more deeply into events.It is also suitable as recommended reading for a management or organization behaviour course. This exploration was followed by Terry Clague’s invitation to write this book.Helga Drummond is Professor of Decision Sciences at the University of Liverpool Management School. When I applied for financial support to ESRC, I made it clear that this was to be a textual study.Routledge international studies in money and banking 1 Private Banking in Europe Lynn Bicker 12 Money, Credit and Prices Stability Paul Dalziel 2 Bank Deregulation and Monetary Order George Selgin 13 Monetary Policy, Capital Flows and Exchange Rates Essays in memory of Maxwell Fry Edited by William Allen and David Dickinson 3 Money in Islam A study in Islamic political economy Masudul Alam Choudhury 4 The Future of European Financial Centres Kirsten Bindemann 5 Payment Systems in Global Perspective Maxwell J. Wood 37 The Structure of Financial Regulation Edited by David G. Wood 38 Monetary Policy in Central Europe Miroslav Beblav´y 39 Money and Payments in Theory and Practice Sergio Rossi 40 Open Market Operations and Financial Markets Edited by David G. Key actors could not be interviewed at the time because of pending court cases, or in Leeson’s case because they were in custody.The dynamics of organizational collapse: the case of Barings Bank / Helga Drummond. Barings applies to Financial Services Authority to have Leeson licensed to trade financial contracts. ALCO also notes inaccurate reporting of margin requirements.Daily income report suggests Leeson made over £3 million in a single day.Los 25 Financial Geography A banker’s view Risto Laulajainen 26 Money Doctors The experience of international financial advising 1850–2000 Edited by Marc Flandreau 27 Exchange Rate Dynamics A new open economy macroeconomics perspective Edited by Jean-Oliver Hairault and Thepthida Sopraseuth 28 Fixing Financial Crises in the 21st Century Edited by Andrew G. S., Euro-area and Japan Edited by Willi Semmler 30 Exchange Rates, Capital Flows and Policy Edited by Peter Sinclair, Rebecca Driver and Christoph Thoenissen 31 Great Architects of International Finance The Bretton Woods era Anthony M. Haldane and Victoria Saporta 44 Credit and Collateral Vania Sena 45 Tax Systems and Tax Reforms in Latin America Edited by Luigi Bernardi, Alberto Barreix, Anna Marenzi and Paola Profeta 46 The Dynamics of Organizational Collapse The case of Barings Bank Helga Drummond The Dynamics of Organizational Collapse The case of Barings Bank Helga Drummond First published 2008 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 This edition published in the Taylor & Francis e-Library, 2007. Janet Briddon carefully checked the text – the remaining errors are mine.Endres 32 The Means to Prosperity Fiscal policy reconsidered Edited by Per Gunnar Berglund and Matias Vernengo 33 Competition and Profitability in European Financial Services Strategic, systemic and policy issues Edited by Morten Balling, Frank Lierman and Andy Mullineux 34 Tax Systems and Tax Reforms in South and East Asia Edited by Luigi Bernardi, Angela Fraschini and Parthasarathi Shome 35 Institutional Change in the Payments System and Monetary Policy Edited by Stefan W. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of e Books please go to” Routledge is an imprint of the Taylor & Francis Group, an informa business © 2008 Helga Drummond All rights reserved. Much has happened since I sat reading by the stream. Ron Baker becomes Head of Financial Products Group.


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