b_720_960_16777215_00_images_portrait__0016_Banking_2.jpgBanking on success: At the height of its powers in the 1600s, Exeter’s woollen cloth industry dominated the region. Although the trade dwindled to nothing over the next 150 years, it still left a legacy. Tuckers Hall is one visible reminder of the cloth trade’s importance, as are the grand merchant houses that can still be seen around the city today. But one of the industry’s most significant legacies came in the shape of a business, that of merchant banking.

Prosperous partnership

The story of Exeter’s most famous banking family begins in Germany. John Baring was born in 1697 in the city of Bremen, in northern Germany. Aged 20 he came to Exeter to pursue a career as a woollen cloth merchant. John was hardworking, but he was also lucky. In 1723 he married Elizabeth Vowler, the daughter of a wealthy local tea and coffee wholesaler. The marriage gave Baring access to his father-in-law’s capital and, in Elizabeth, a shrewd and determined business partner. Over the next two decades, John Baring rose to become one of Exeter’s wealthiest cloth merchants.

Baring died in 1748, but this was not to be the end of his business. Elizabeth continued with the help of her three sons. On her death in 1766, The Barings business was doing well and had even managed to establish a second part to its business, this time in London. This operation was managed by Elizabeth’s youngest son, Francis Baring.

Capital growth

The London business represented Barings and other Exeter wool merchants in the capital’s busy and lucrative markets. Progress wasn’t always smooth – London Barings lost money in eight of its first 14 years. But gradually, under Francis’s leadership, it found its feet, and by 1777 London Barings was far out-performing the Exeter branch, so much so that the two businesses parted company.

From that point on John and Francis Baring & Co, as the London business came to be known, expanded and diversified its interests. The cloth trade became only a small part of a much larger enterprise. Barings continued to act as merchants, buying and selling many different commodities, but increasingly the firm also began offering services to other merchants – arranging shipping, underwriting insurance and lending money. It was this merchant banking operation that soon came to dominate the business.

Brought down by a rogue

Slideshow: Click for Image GalleryFrom the late 1700s until the rise of the famous Rothschild Bank in the 1820s, Barings was the dominant merchant bank in the City of London and throughout the world. By 1804 and the time of his retirement, Francis Baring had collected a knighthood along with a massive personal fortune – not bad for the son of an Exeter cloth merchant.

Although Barings Bank never again enjoyed the dominance that it achieved in the early 1800s, it still remained a significant international merchant bank for nearly 200 years until disaster struck in 1995. Nick Leeson, a trader in the bank’s Singapore offices, had been undertaking unauthorised financial deals. In short, he was a ‘rogue trader’ who had gambled with the bank’s money and lost.

When Leeson was discovered, he had run up losses of £827 million. This was too much for the bank to shoulder. Despite last gasp rescue attempts from the Bank of England, Barings Bank was declared insolvent on 26 February 1995.

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