Barings Bank

ON SUNDAY, February 26, 1995, the banking world was stunned by the announcement that Barings Bank, Britain's oldest merchant bank, had collapsed. Barings owed £827 million on financial [Page 84]derivatives contracts, but the bank's entire assets amounted to little over £540 million. Barings' exclusive clientele, which included the British Royal Family, stood to lose all the money they had invested in the bank. The fact that one trader at Barings' Singapore office had accumulated the losses revealed the bank's lack of effective internal controls, and undermined confidence in the “gentlemanly” capitalism practiced by traditional merchant banks.