Nick Leeson is a former trader at Barings Bank who is infamous for his role in losing $1.3 billion of the bank’s money through unauthorized and risky trades. This catastrophic loss resulted in the collapse of the 230-year-old Barings Bank and ultimately led to Leeson’s imprisonment. This article explores the life of Nick Leeson from his early beginnings to his downfall as a rogue trader .
Early Life and Career Beginnings
Nick Leeson was born on February 25, 1967 in England. Rather than pursuing higher education Leeson started his career as a clerk at Coutts Bank after finishing secondary school. He gradually climbed the ranks in the financial services industry and worked for notable companies such as Morgan Stanley and Barings Bank.
The Rise at Barings Bank
When Leeson joined the Singapore branch of Barings Bank as a futures trader his career quickly took off. He soon advanced to become the general manager of the Singapore trade division because to his remarkable talents. On behalf of Barings customers Leeson principally engaged in arbitrage trading on the Nikkei 250 which is the primary index in Tokyo . His trading endeavors were incredibly successful and considerably increased the bank’s profits.
The Unraveling of Barings Bank
Without Barings Bank’s knowledge Leeson had been concealing substantial losses from his hazardous investments . He engaged in illicit trading with clients’ money to try and make up for these losses. By changing the entries in an erroneous account named 88888 he was able to hide the losses. Leeson used a doubling approach in an effort to make up for his losses by making bigger and riskier wagers. These activities caused growing losses particularly through futures contracts that eventually reached a startling $1.3 billion.
The Catastrophic Consequences
Leeson’s downfall came when the Kobe earthquake struck Japan in early 1995 and caused a sharp decline in the Nikkei index. Leeson had bet on the Nikkei’s rise and his strategy quickly unraveled . As losses piled up he attempted to recover but his efforts only worsened the situation. Realizing that detection was imminent Leeson fled Singapore which left behind a confession . He was arrested in Frankfurt and extradited to Singapore to face trial.
Conviction and Imprisonment
In December 1995 Leeson who had been charged with a number of offenses including falsifying papers and misleading bank auditors entered a plea of guilty to two charges . He was found guilty and given a 612 year jail term in Singapore. Due to a diagnosis of colon cancer Leeson was given an early medical release after serving four years .
Legacy and Aftermath
The example of Nick Leeson highlighted the value of internal controls and the need for more stringent transaction audits inside financial institutions . The episode brought to light the risks involved when a trader takes even riskier measures to make up for losses. In 1999 Leeson released his autobiography “Rogue Trader” which detailed his life and the demise of Barings Bank . The book was eventually made into a movie starring Ewan McGregor. Since then Leeson has rebuilt his life and established himself as a prominent business speaker who counsels corporate clients on risk, governance and compliance .