2020 hindsight: what can supervisors learn from the collapse of Barings Bank 25 years on?

Ben Dubow

This year marks 25 years since the failure of Barings Bank. On Sunday 26 February 1995, the 200-year old merchant bank blew up thanks to derivatives trading, which it believed was both risk-free and highly profitable. It was neither of these things. The firm’s star trader was illicitly pursuing a strategy akin to ‘picking up pennies in front of a steam-roller‘. The steamroller arrived in the form the Kobe earthquake. The star trader’s losses ballooned and he doubled up on his bets, unsuccessfully. Barings went bankrupt. The episode captured the public imagination, and helped lead to the creation of a new regulator in the UK. 

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Supervisory governance, capture and non-performing loans

Nicolò Fraccaroli

Recent reforms that followed the Great Financial Crisis, as the establishment of the Single Supervisory Mechanism in Europe and the Prudential Regulatory Authority in the UK, reflect the belief that the governance of banking supervision affects financial stability. However, while existing research identifies the pros and cons of having either a central bank or a separate agency responsible for microprudential banking supervision, the advantages of having this task shared by both institutions (shared supervision) have received considerably less attention.

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