SpezCanSuckMyDick

Even the provisional conclusions of the report are interesting. I should like to give them to the House so that we may be reminded what the supervisory body itself decided at the end of such investigation as it was able to make. It stated on page 250:

"Barings' collapse was due to the unauthorised and ultimately catastrophic activities of, it appears, one individual (Leeson) that went undetected as a consequence of a failure of management and other internal controls of the most basic kind".

The words I venture to emphasise to your Lordships are these:

"as a consequence of a failure of management and other internal controls of the most basic kind".

-Lord Bruce of Donington, in the House of Lords' debate on the Barings report

The only way anyone lost their life savings is if they had put it all into uninsured, unsecured investments through Barings. That is to say, not random stocks or bonds, but specific investments based on the trading that Barings does. Which would again be a failure "of the most basic kind".

Nick sold insurance policies. Stupid accounting practices allowed him to realize the insurance premium as profit without ever putting any money aside for the possibility that the insurance has to pay out and take a loss. You then take that money and use it again to sell more insurance policies, creating an infinitely growing loop. At the end, he had to pay out on every insurance policy, thereby blowing up the bank.

As the UK's investigation found, even the most basic controls should have stopped this, because it clearly breaks logic. Funny enough, this is basically what Enron did 20 years later.