The Fall of Barings Bank
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Case Code : FINC025
Case Length : 11 Pages
Period : 1992 - 2003
Pub. Date : 2004
Teaching Note :Not Available
Organization : Barings Bank
Industry : Banking and Financial Services
Countries : UK
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
The End Result
The fall of Barings not only shocked the financial markets world over, it also exposed their vulnerability. On February 26, 1995, Barings was declared insolvent under the UK Insolvency Act, 1986.
Administrators were appointed to take control of the assets of the bank and its subsidiaries. A week later, all the assets and liabilities of Barings Bank and its subsidiaries (except BFS) were acquired by the Internationale Nederlanden Groep NV (ING).
ING was looking to expand its investment banking business especially in Asia, where Barings had an extensive business network involving merchant banking activities such as investment banking, corporate banking, venture capital and capital markets operations, together with securities trading and asset management. ING paid one pound for Barings and took on the responsibility of paying the entire $1 bn debts that Barings had accumulated...
Exhibit I: Barings Organization Prior to Merging of Banking and Securities Businesses
Exhibit II: Barings After the Merger of Banking and Securities Businesses
Exhibit III: Graphical Representation and Payoff Table of a Short Straddle Strategy