BARINGS WAS FORCED TO DECLARE BANKRUPTCY AFTER REPORTING OVER USD...

2015 FRM PRACTICE EXAM

25.

Barings was forced to declare bankruptcy after reporting over USD 1 billion in unauthorized trading losses by

a single trader, Nick Leeson. Which of the following statements concerning the collapse of Barings is correct?

Leeson avoided reporting the unauthorized trades by convincing the head of his back office that they did

not need to be reported.

Management failed to investigate high levels of reported profits even though they were associated with a

low-risk trading strategy.

Leeson traded primarily in OTC foreign currency swaps which allowed Barings to delay cash payments on

losing trades until the first payment was due.

The loss at Barings was detected when several customers complained of losses on trades that were

booked to their accounts.

in any format without prior written approval of GARP, Global Association of Risk Professionals, Inc.