HIS NAME HAS become iconic, and these days Nick Leeson is a celebrity of sorts.
The man who brought down one of England’s oldest merchant banks single-handedly now works as an after-dinner speaker and routinely criticises financial institutions for having diligence structures not fit for purpose.
He makes his home with his second wife in Barna, Co. Galway, and was even chief executive of Galway United for a time if you can fathom that one.
In a a world made numb by sub-prime scandals and the likes of Jerome Kerviel, Leeson was the original.
But how did his saga unfold? TheJournal.ie takes a look
July 1989
22-year-old Nick Leeson joins the settlements’ department of Barings Bank in London having learned the art of trading in futures (buying or selling a commodity with a contract to purchase or sell it back at a specific price at a future point in time) in Japan.
The famed merchant bank had been on the block for 227 years and was very much part of the City of London furniture.
Early 1990
Leeson is dispatched by Barings to their office in Jakarta, Indonesia. His goal? Sorting through £100 million worth of back office contracts that are in such a complete mess none of them are being settled.
September 1991
Having succeeded in his mammoth task, Leeson returns to London to investigate an apparent fraud in Barings’ derivatives trading. This mission completed successfully, his reputation at the bank swells.
February 1992
Leeson applies for a City of London trading licence but the application falls through over concerns regarding an outstanding county court case against him, something which is held back by Barings when he later passes his trading exam in Singapore.
March 1992
25-year-old Leeson marries fellow Barings employee Lisa Sims whom he met while working in Jakarta.
April 1992
Leeson is posted to Barings Futures Singapore (BFS) to run the back office of Barings’ derivatives operation at the Singapore International Monetary Exchange (SIMEX).
July 1992
An accounts technician creates Account 88888 for Leeson at SIMEX, an ‘error account’. Initially intended for inexperienced traders to report their losses, the account is eventually appropriated by Leeson for his own use and excluded from general reporting lines.
September 1992
Leeson passes the SIMEX trading exam, thus entitling him to trade on the exchange floor for the first time. Almost immediately, he begins to make large-scale unauthorised trades on the Japanese Nikkei futures index.
By end-September he has accumulated losses of about £6 million in Account 88888.
December 1992
At year end, Leeson reports profit-earnings to Barings of some £10 million. He is rewarded with a £150,000 bonus to supplement his £50,000 salary.
In truth Account 88888 is covering for roughly £2 million in losses. The template for the next two years is set.
March 1993
Barings’ senior management is restructured with long term chief executive Christopher Heath replaced by Peter Norris. In June, Leeson is appointed both as head of trades for Barings in Singapore while also maintaining responsibility for his own trades, making the concealing of losses all the easier.
July 1994
Over the following year, Leeson accumulates massive losses in betting wildly on Nikkei futures, all of which he conceals, all of which he tries to recoup in ever more outlandish trades.
An internal audit at end summer 1994 reveals to BFS the extent to which they are exposed by Leeson’s dual status. They choose to trust in their star trader’s judgement and consistent results and leave things as they are.
December 1994
Leeson has accumulated trading losses of £208 million in the 88888 account. Officially, he is massively in profit.
January 1995
An audit official notices a discrepancy in Leeson’s accounting trail. He concocts a story regarding a paper trade brokered by two clients. He manufactures a payment receipt to corroborate his story. It is now that Leeson decides to go for broke and attempt to reverse all his losses.
On 16 January, he bets everything that the Nikkei will not descend below 19,000 points. On the morning of 17 January a massive earthquake hits Kobe, Japan sending the index into a tailspin.
Despite this, Leeson continues to raise the stakes hoping the market will rebound. It doesn’t.
The sum total of losses is £862 million, twice Barings available trading capital. That figure will rise to £1 billion after Leeson absconds.
February 1995
On 23 February, Leeson and his wife flee Singapore for Kuala Lumpur. Investigating, Barings officials finally discover the 88888 account and the losses it contains, for which the bank is liable. Following a frantic failed bailout attempt the bank ceases trading for the last time on 26 February.
March 1995
Leeson is apprehended in Frankfurt on 2 March having fled via Brunei. He remains in custody in Germany until his extradition to Singapore in November. On 6 March, Barings is officially acquired by Dutch investment group ING for the nominal sum of £1. About 1,200 employees in Singapore lose their jobs with the bank’s collapse.
Leeson is sentenced to prison for six years on two charges of fraud and forgery. BFS is criticised heavily by Singaporean authorities for the failure of their internal controls. While in prison Leeson publishes his autobiography ‘Rogue Trader’ and is divorced by his wife.
July 1999
Suffering from colon cancer (which he subsequently recovers from), Leeson is released from prison early for good behaviour. He now lives in Barna, Galway.
We’ll leave the last word to the man himself:
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