Barings Bank
Baring Bank - How did Baring Banks' organizational architecture contributed to its failure?
The Baring brothers (Francis and John) set up the bank that takes up their family name in 1762, with the headquarters in London. Shortly, the company's strategy in promoting international trade and bilateral commercial relationships among countries proved to be very profitable. The business of the bank - its deposits and loans - included major deals in Britain, U.S. And France, from various domains - financing military campaigns (French - Britain war), province acquisitions (Louisiana) and revolutionary wars (U.S.).
The company continued to prosper during the centuries and up to the middle of the '90, especially due to profitable stock investments in the Asian financial markets. One financial transaction concluded the banking activity of the company. One of investment managers within the bank was expected to make an arbitrage transaction (simultaneously and risk-free acquisition and sales of security from different markets). Instead, Leerson, the person under discussion, decided not to conduct arbitrage, but to risk by buying securities on both markets, under the expectations of growth. In fact the price of the securities decreased, and due to the large invested sums, the bank went into bankruptcy.
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