In general, the Barings Bank collapse was the result of poor operational controls characterized by poor reporting systems, weak management oversight, and poor organizational structure. Leeson’s dual responsibility for trading and settlement enabled him to hide trading losses in accounts that were not reported to management. Although a history of legal problems would have precluded him from trading on the LIFE, he was permitted to trade in Singapore. Model risk and leverage were issues in LTCM. Using short-term instruments to hedge long-term risk exposure was an issue in Metallgesellschaft. |
