I’ve have been asked to do a few interviews over the last few days as next week marks the 25th anniversary of the collapse of Barings Bank. I fled Singapore on the 23rd February 1995 after being presented with a simple position reconciliation. I spent the 24th and 25th February hidden away in hotels in Kuala Lumpur and Kota Kinabalu when the enormity of my actions really started to hit home through the world’s media, broadcast and print.
That period is a haze now, it was then as well. As the ramifications of my actions were finally starting to hit home, the more immediate thought was self-preservation and a simple fight or flight mechanism was kicking in. That’s not easy to write, it sounds selfish and it most definitely is, but that’s what happened.
Over the next two days – a weekend – the 25th and 26th February, various attempts were made to either sell or save the bank. I believe that the bank was declared insolvent on the Monday morning, 27th February 1995.
It’s not going to come as much of a surprise that risk management and compliance wasn’t particularly good at the time. Barings may have been an extreme example but back in the 90s anything with a cost associated with it was frowned upon, profit was king.
One of the most common questions is ‘How much better is Risk Management twenty-five years on?’ The answer is that it has improved immeasurably. In 1995, if there was a role that was needed in risk management, the first thing that would happen in operations would be to see who could double-job. Most of the time at Barings, the compliance officer became the de-facto RiskManager. It satisfied two critical criteria at the time, no increase in cost and by having two jobs to deal with, they would be even less likely to ask any questions.
So whilst the answer is that the changes have been monumental, you have to understand that Risk Management was starting from a really lowly base, twenty-five years ago. The systems, controls and most importantly people are far better and far better qualified than they were. I think most will admit that there is still some work to do but the industry is in a far better place than it was during my time at Barings.
‘Financial Scandal’ – just by reading the words suggest something that is complex and difficult to understand. Any financial scandal for me is characterised by three things: poor systems, poor controls and poor quality of people in those control functions. The clues, the information, is always there, it’s just whether or not you are choosing to use it.
Sir Gavin Laird (a former Member of the Court of the Bank of England) at a dinner that I was speaking at in St Andrews Golf Course, made a speech that suggested what I did at Barings was sophisticated, meticulous, complex, well thought out and that I sought to undermine the banking system in the United Kingdom. I’m sorry but he was wrong on all counts. It was crude, basic, full of holes and someone massively out of their depth.