For the Barings case study, what external event may have accelerated the discovery of the...

Background of the Barings Case Study

TheBarings Bank collapseoccurred due to unauthorized derivatives trading byNick LeesoninSingapore.

Leeson concealed losses, and his trading positions became unmanageable.

How the Kobe Earthquake Affected Barings

OnJanuary 17, 1995, theKobe earthquakecaused extreme market volatility.

Leeson's unauthorized trades were highly exposed to the Nikkei 225 index, and the earthquake triggeredheavy losses.

The eventaccelerated the exposure of Leeson’s fraudulent activities, leading toBarings' collapse.

Why Answer D is Correct

TheKobe earthquake created market turmoil, forcing Barings toconfront its financial position, ultimately revealing the hidden losses.

Why Other Answers Are Incorrect

Option

Explanation

A. The collapse of Lehman Brothers into bankruptcy in 2002.

Incorrect–Lehman Brothers collapsed in 2008, not 2002.

B. The Singapore earthquake of January 17th, 1995.

Incorrect– No significant earthquake occurred in Singapore on that date.

C. The collapse of Lehman Brothers into bankruptcy in 2008.

Incorrect–Barings collapsed in 1995, not related to Lehman Brothers' 2008 failure.

PRMIA Case Study on Barings Bank Collapse

Basel Committee Principles on Risk Oversight and Fraud Prevention

PRMIA References for Verification