THE BARINGS CRISIS: SOME LESSONS FOR THE MANAGEMENT OF TRADING RISKS IN FINANCIAL INTERMEDIARIES

Abstract

The collapse of Barings Bank in February this year provided a stark illustration of the need for adequate systems and controls in managing trading risks. This paper reviews the current advice on best practice from regulators, industry groups and government agencies. It emphasises the importance of strong corporate governance, the need for a strong risk management infrastructure, and suggests ways in which the incentives for excessive risk‐taking generated by existing systems of bonus payments might be corrected. The paper also recommends each firm perform an annual risk control assessment under the direction of its audit committee. It concludes by arguing that enhanced public disclosure has an essential role to play in providing an additional discipline on the board and senior management to ensure the adequacy of systems and controls.

Citation

TAYLOR, M. (1995), "THE BARINGS CRISIS: SOME LESSONS FOR THE MANAGEMENT OF TRADING RISKS IN FINANCIAL INTERMEDIARIES", Journal of Financial Regulation and Compliance, Vol. 3 No. 3, pp. 211-221. https://doi.org/10.1108/eb024844