Explanation:
The correct answer is C.
The infamous collapse of Barings Bank in 1995 was primarily caused by massive, unauthorized speculative trading by Nick Leeson, the head derivatives trader at the bank's Singapore office. Leeson engaged in high-risk speculative trades on Asian futures markets, particularly on the Nikkei 225 index. Due to a lack of proper internal controls and risk management (Leeson controlled both the trading desk and the back office), these trades were largely unchecked.
While the Kobe earthquake (Choice B) did cause a sharp drop in the Nikkei, severely compounding Leeson's losses, the fundamental failure was the absence of oversight and separation of duties that permitted the unchecked speculative trades in the first place.
Choices A and D are incorrect as they were not the causes of the bank's collapse.
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Q.4323 The infamous collapse of the oldest merchant bank in England, Barings Bank, in 1995 after 233 years of existence, can be traced down to one key reason:
A
A bank run
B
The Kobe earthquake in Japan, which rattled financial markets in Asia and hence, severely affected the bank’s activities.
C
Largely unchecked speculative trades.
D
A total overhaul of the board of directors which resulted in the loss of investor confidence.
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