The crisis was precipitated by the near insolvency of Barings Bank in London. Barings, led by Edward Baring, 1st Baron Revelstoke, faced bankruptcy in November 1890 due mainly to excessive risk-taking on poor investments in Argentina. Argentina itself suffered severely in the recession of 1890 with its real GDP falling by 11 percent between 1890 and 1891, An international consortium assembled by William Lidderdale, governor of the Bank of England, including Rothschilds and most of the other major London banks, created a fund to guarantee Barings' debts, thereby averting a larger depression. Nathan Rothschild remarked that if this had not happened, perhaps the entire private banking system of London would have collapsed which would have caused an economic catastrophe.
The international financial distrust generated with this crisis helped to blow a bubble in the Brazilian economy, which had been inflating since the previous decade, anticipating both its expected end, as the financial crisis that followed on that country, which in turn along with Argentine and Uruguayan crisis, dramatically decreased the amount of money sent by European immigrants to their countries of origin, also affecting the economy overseas in the 1890s.