Question 10: Was Senior

management at Barings aware that

there was a problem at BFS?
Explain

The management wasnt aware of

the problem until the megamargins calls in January and
February 1995.
It is only at this time, that
management suspected Leesons
trading was not arbitrage but naked
positions and sent a team of
auditors, but at this time it was too
late, losses exceeded the value of
the firm.

Why we can doubt about the management

ignorance?
Process of loans to clients should request
someone in the bank to check
creditworthiness and level of exposure.
Difference between margin deposited by
Barings customers and the amount of
funding requested by Leeson. This
difference was GBP100m by the second half
of 1994.

Conclusion : As if it appears that the

management was not officially aware
of the problem, it seems really
surprising. This case recall the more
recent one with Jerome Kerviel and
Societe Generale and its loss of
EU4.9Bn in 2008, where the
management was officially not aware,
but in reality let him act because of
the bonus exposure for his superiors.