Few things happened in the 1990s, who excited the world just as much, like the collapse of British bank Barings at the end of February 1995 of the year. What shocked the most was, that the bank, whose history included 233 of the year and who was entrusted with their money by representatives of the aristocracy and the royal family, collapsed as a result of overt and covert speculation by a single person - 28-year-old trader Nicholas Leeson (Nicholas Leeson). His self-confidence and passion for risk taking, as well as the greed and stupidity of his bosses, That, admiring the "sky-high" profits, turned a blind eye at the subordinate's scams, deprived the bank 850 million. pounds, killing the investment empire overnight, whose strength seemed unshakable.
The story of the Barings collapse is extremely instructive, because it is not only the “quintessence of morality” of modern financial markets, but also a clear picture of that, What are the dire consequences of ineffective financial risk management?. IN 1996 year, being in prison on charges of forgery and deception, Leeson publishes his autobiography "Rogue Trader" ("Rogue trader"), where he spoke in detail and frankly about his deeds. Without trying to absolve myself of the blame, he stressed (and on this very many experts agreed with him), that what he had done became possible only due to very imperfect audit and risk management methods, practicing at the bank, not to mention the connivance of bosses and colleagues. Ethics of Conduct at Barings, according to Nick Leeson, was simple: “We were all forced to make profits, arrived, more and more profits ... "It is no coincidence that in the review of" Rogue Trader ", published in the financial column of the newspaper "New York Times" indicated, that “this is a dark book, written by a young man, extremely busy with myself, but it must be read by all bank managers and auditors ”.
Nick Leeson is a rising star in the bank, but ambition has taken him too far, and instead of the fame of a financial genius, he got only the world fame of a major, but a very unlucky scammer. "Unfortunately, Until the day I die, I will always be known as a crook trader, – Nick Leeson once said about himself. - This is the title, from which I have nowhere to get away; I can never change it. I am reconciled and I just live with it ”.
The beginning of the life path of Nick Leeson resembles a classic fairy tale on the theme "from rags to riches" – about the poor boy, suddenly reached the heights of wealth and honor. He was born 25 February 1967 years in the small town of Watford, located northwest of London, in a poor working-class family. His father William (William) was a plasterer and wanted, for a son to become a construction engineer. Truth, in high school Parmiter's School, where did Nick study, teachers found his mathematical ability very weak. He failed his math final exam and left school, having received only a few testimonies. IN 1982 year Leeson got a job as a clerk at the royal bank Coutts, after which he worked in minor positions in other banks, including Morgan Stanley. In July 1989 of the year he was hired by Barings Bank - the oldest bank in the UK, based in 1762 year and enjoyed an impeccable reputation. Among his clients was the Queen of England herself..
Having started the service as a simple clerk, Nick Leeson quickly made a favorable impression on management. Soon he asked for a transfer to Southeast Asia, got consent and went to Hong Kong, where he was assigned to solve special problems, related to the accounting of banking operations, at the head of a team of four. He was then transferred to Jakarta, where he met his future wife Lisa, local employee at Barings Securities. Nick Leeson's successes in Jakarta, where is he during 10 months dealt with a mountain of problems in the back office of the local branch, were appreciated, and c 1992 He was appointed to the Singapore branch of Baring Securities in the newly created position of Derivatives Manager of the Singapore International Currency Exchange. (Singapore International Monetary Exchange, SIMEX). In this capacity, he should not have been involved in trading., however soon, passing the relevant exam, started trading on SIMEX himself as the head of a small team of traders. Besides, he de facto headed the back office of the Singapore branch, due to his extensive experience in this field. In this way, Barings made a fatal mistake from the start, allowing Nick Leeson to combine the positions of chief trader and head of the back office, which should be shared, since the back office carries out accounting and independent verification of the results of trading operations.
Nick Leeson and his team were authorized to conduct two types of operations: transactions in futures and options on behalf of clients or other Barings divisions, as well as arbitrage on the difference in prices between futures on the leading Japanese Nikkei index 225, traded on SIMEX and the stock exchange in the Japanese city of Osaka. In theory, arbitrage operations are considered risk-free, in practice this is not the case, however, compared to other strategies, they have a low level of risk. Maybe, this is what contributed to, that the bank's top managers were not overly alarmed by the egregious conflict of interest, taking place in the above combination of posts. Thanks to Nick Leeson's flair, allowing him to correctly predict the future direction of the Nikkei, Barings soon received multimillion-dollar profits from its Singapore subsidiary.. Based on the results of 1993 he earned more than 10 million. pounds, which was about 10% from the total annual profit of the bank. Leeson's London bosses rejoiced, Seeing, how profits flow into the bank, and completely trusted the "miracle trader".
It seemed, that Nick Leeson and his wife Lisa have everything, what you can wish for: high salary and bonuses, nice apartment, weekends in exotic locations, frequent parties and all kinds of entertainment. AND, moreover, spouses, Seemed, were head over heels in love with each other. Truth, in his spare time, Leeson often attracted attention with an excessive addiction to the "green serpent", and sometimes hooligan antics. Once he even spent the night in a sobering-up station and was sentenced to a monetary fine for immoral acts., after showing his naked ass in the bar.
Nick Leeson, obviously, seemed to the top managers of Barings absolutely infallible. Leeson's operations were deemed safe by Barings, especially since he himself claimed, that he followed the orders of clients and deposited collateral on margin accounts on their behalf. The company did not know, that almost from the very beginning of his activity as a trader he conducted unauthorized trades and, what is most unpleasant, these trades were too often unprofitable. Nick Leeson used a special "error count" (Error Account) Under the number 88888 (number, considered very lucky in Chinese numerology), where he hid his losses. As Leeson later argued, this account was originally opened for, to hide the error, committed by an inexperienced member of his team and resulting in losses in the amount of 20 thousand. pounds. However, then Leeson began to use the account 88888 to hide their own losses, which grew like a snowball.
By the end 1992 losses, hidden in the "lucky" account, exceeded 2 million. pounds, and by December 1994 this figure was 208 million. pounds. Nick Leeson requested and received additional funds from the bank to continue trading. Trying to get out of a hopeless situation, he got more and more confused. His main stake was on, that the Nikkei will not fall below 19000 points. At that moment, such a decision seemed reasonable., as the Japanese economy was just recovering from a 30-month recession. But suddenly everything went to dust.
16 January 1995 years Nick Leeson made the deal, which became the beginning of the end as for himself, and for the whole bank Barings. He sold the straddle (simultaneous sale of put and call options with the same prices and expiration dates in order to make a profit in a sideways trend), Counting, that the Japanese market will not undergo major changes before the next business day. but 17 January 1995 years in 5:46 an earthquake in the morning 7,2 points on the Richter scale destroyed a significant part of the Japanese city of Kobe and claimed the lives of about 6,5 thousand of its inhabitants. It was the most powerful earthquake, what happened in Japan with 1923 of the year. As a result, the previously weakly fluctuating Nikkei index fell to 7%. Leeson's losses on the day of the earthquake alone amounted to more than 55 million. pounds, and the total amount of losses "went off scale" for 400 million. pounds.
Feeling, that the ground is burning under his feet, Nick Leeson tried to stave off collapse with increasingly reckless and risky trades. He massively bought up Nikkei futures contracts with the expectation of an increase in their price.. Leeson's hopes were built on, what's behind the recession, caused by an earthquake, market recovery will follow, and Nikkei will again be able to stabilize at the level 19000 points. Over the course of three months, Leeson bought more than 20 thousand. futures in vain attempts to pressure the market. He did not hedge positions or take any other precautions., to protect your home bank from huge risk, to which he was subjected. However, he did not wait for the restoration.. Later found out, that buying up futures was responsible for about three-quarters of Barings' losses.
Leeson's bosses, alarmed by requests from him for additional funds, in February 1995 conducted a selective audit. As a result, losses were revealed, reaching an astronomical amount of 827 million. pounds (about $1,4 billion. in accordance with the then exchange rates), which was almost twice the bank's own capital. For employees, auditing, all that remained was to notify Barings' senior management, that the bank is practically ruined.
Nick Leeson, realizing, that the secret is about to be revealed, decided to go on the run. He disappeared from Singapore two days before his 28th birthday., leaving a hastily scrawled note on your desk, where it said only "Sorry" (“I’m Sorry”). Only then did his colleagues begin to understand, what caused the bouts of vomiting, which began at Leeson a week before the flight. The trader guessed, that he faces imprisonment for fraud, and preferred to go to prison in the UK, not in Southeast Asia, where the attitude towards criminals is much tougher.
First, he went with his wife to Malaysia, where he celebrated his birthday at one of the fashionable resorts on the island of Borneo. He learned about the scandal that broke out from the media.. From Malaysia, the couple went through Brunei to Frankfurt am Main. At this time, Leeson's photographs were already showing off on the front pages of all newspapers., and he was wanted by the international police with great diligence, than any other criminal in the world. When he checked in at the airport under his own name, covering his face with a baseball cap, the German authorities were immediately warned. Before Nick Leeson and his wife got off the plane, how they were greeted by the police.
News of the arrest of a swindler trader sparks an uptick in global futures markets. However, the 233-year-old Barings Bank, support and stronghold of the British financial establishment, nothing could help. Investors, including her majesty the queen, lost their investments, about 1200 employees - their jobs. The bank itself was bought by the Dutch financial and insurance giant ING, accepting its obligations, for a token amount of 1 pound sterling and ceased to exist as a separate company.
Who was to blame for the disaster?? Nick Leeson – without any doubt. He pleaded guilty to, that falsified documents and misled like a bank, and SIMEX exchange. However, when the excitement subsided, collapsed Barrings, the famous question of the Watergate process was raised: what did the president know, and when he knew it? Although the illegal nature of Leeson's actions was not in doubt, could the bank's top managers be completely unaware of its fraudulent activities? The Bank of England concluded in its report, that the dashing speculator acted alone, managing to fool his superiors until that moment, when it was too late to save the bank. Undoubted is the fact, that most of the representatives of the “old school” in the bank's management have never really understood or tried to understand the intricacies and snags of such a complex area, as trading in derivatives. On the other hand, Huge futures arbitrage profits meant big year-end bonuses for Barings employees, and therefore they did not want to ask the question of whether, where do such high numbers come from.
Barings has failed to completely avoid accusations of his involvement in the disaster. As it turned out,, one of the internal memo, dated 1993 year and sent to the headquarters of the bank in London, contained a hazard warning, Related, that Leeson is allowed to simultaneously trade and run the back office. The note said: “We are under threat of creating a system, which will destroy us ". However, the management did not take any action.. In January 1995 of the year, literally on the eve of the disaster, SIMEX Exchange Expresses Concerns About Leeson's Activities, but even this warning remained without consequences. The bank still transferred to its trader $1 billion. to continue trading. In a report on the collapse of Barings, prepared by the Singapore authorities, mistrust of Leeson's bosses was expressed, who were all forced to resign, about that, that they were unaware of the existence of an "error count" 88888.
But back to Nick Leeson, from which fortune, until then, so extraordinarily kind to him, so suddenly turned away. After his arrest in Germany, he made every effort for several months to, to avoid extradition to Singapore, but he did not succeed. In December 1995 of the year, a Singaporean court sentenced him to six and a half years in prison with confiscation of property in favor of the creditors of the bankrupt bank. In view of the fact that, that Leeson was imprisoned in Germany for almost nine months, awaiting extradition, the period was counted from 2 Martha 1995 of the year. Nick Leeson was found guilty on two counts: misleading the bank's auditors and deceiving the SIMEX exchange. The punishment was not so severe, As might be expected, since the court decided, that the accused acted unintentionally. The trader himself claimed, that he never used unauthorized tenders for his own benefit, although the bank's lawyers found about $35 million. on various accounts, related to Leeson.
Nick Leeson's personal life, Seemed, reflected the ups and downs of his career. His wife Lisa got a job as a flight attendant, to be able to visit my husband regularly. She even helped him write the book "Rogue Trader", published in 1996 year (By the way, the royalties for it were fully paid to Barings' creditors). At first sight, their marriage took a hit, inflicted by separation and sudden transition from a “beautiful life” to a plight. But with what Lisa could not come to terms, so this is with her husband's revelations about his cheating with geisha. The loss of a once so devoted and loving wife, who divorced him, and then remarried – and again for a trader from the City of London – extremely hard on Leeson, increasing in him a sense of hopelessness. Subsequently, he recalled, that the most terrible time is even worse than the period, when he was fighting cancer, – were for him seven months from March to October 1996 of the year, when Lisa's visits stopped and the flow of letters dried up, who previously came almost daily. The relationship with Lisa was the mainstay of Leeson in his prison life - until, According to him, he suddenly did not stop understanding, what happens between them. In the end, Nick Leeson wrote to his wife, offering a divorce, and two weeks later she said yes.
A few months later, Nick was diagnosed with a terrible diagnosis.: colon cancer. It was this disease that killed his mother., when he was only twenty. By the way, father was diagnosed with myeloma, diagnosed after, how did the son get sick?. The disease has led to, what of a young life-star and a party goer, able to absorb a huge amount of alcohol, Leeson has become almost his own shadow.
Prison in Singapore was not very supportive of the resilience of the immune system. Together with two other criminals, Nick Leeson during 23 hours a day was imprisoned in a small cell. His “comrades in misfortune” belonged to rival gangs, And, when there were fights between them, it was impossible to evade. I slept on a bare concrete floor. Breakfast consisted of three slices of bread, and the rest of the meals consisted of endless monotonous rice, seasoned with chicken or vegetables. Time, Seemed, didn't move; to kill him somehow, Nick buried himself in detective novels or paced the camera for hours. He also tried to exercise., and at the appointed hour ran around the prison basketball court.
The first signs of the disease Leeson noticed at the beginning 1998 of the year. When he stood, his head was starting to spin, and had to lean on the wall. Prison doctor, to whom he told about his feelings, Said, that he was just getting old - and he was then thirty! Leeson then spent a month in solitary confinement, and when he left there, everyone who saw him began to talk about, how emaciated he was. According to Nick, for the first time in his life, he could see the muscles of his abdomen and thought, which looks quite healthy. Blood test reveals anemia. Then the stomach pains started, which the prison doctor attributed to the action of iron preparations. Leeson needed a "mini riot", arranging which he risked again finding himself alone, before the doctor admitted, that can't do anything else, and referred the patient to a hospital in New Changji.
For all the undoubted financial talent of Leeson "services", which he rendered to the banking sector, can hardly do him credit. But what really deserves admiration, so this is his unimaginable stamina and endurance. Fighting cancer is extremely difficult for humans, are well cared for and given the nurturing attention of family and friends. Leeson was stripped of everything; bedridden, he didn't even have books, and to get to the toilet, every time I was forced to call the armed guards, not in a hurry to help him.
An operation to remove the tumor was performed 11 august. Through 10 days Nick Leeson was back in his cell and slept on the concrete floor. It was especially hard to sit down, since a long incision in the abdomen has just been removed 38 staples fastening it, and the abdominal muscles were dissected during the operation. Luckily for Leeson, the surgeon performing the operation was one of the best in Singapore, while the oncologist studied in Cornell and New York and, according to sources, treated the President of Singapore Lee Kuan Yew (Lee Kuan Yu). Doctors told Leeson, that his chances of living for another five years are 60%, but claimed, that chemotherapy can increase this figure by another 10%. Chemotherapy lasted six months: five days of procedures followed by three weeks of respite. Lison warned, that his health can be very bad, however, he endured the entire course well enough, although I have lost most of my hair.
In summer 1999 years jaded, but the living Leeson was released for good behavior and was able to return to the UK. Although returning home brought the realization that, that a beautiful life has passed, – was not at home, No Work, property was confiscated – Nick Leeson enjoyed life and freedom. He spent his first year with friends and family, while continuing treatment. IN 2000 year Leeson took part in the marathon, although the doctors did not advise him to do it. But he was determined to raise funds for both Colon Cancer Concern, the UK's leading charity., aimed at preventing deaths from bowel cancer, – and for the Linda Jackson MacMillan Center in Middlesex, where is his father treated for myeloma?.
Demonstrating rare resistance, Nick Leeson has also benefited from his unique life and professional experiences.. He received a decent amount of money for publishing his Books piece by piece in the newspaper "Mail". The plot of the book was then turned into a script for the film of the same name. (in Russian translation "Swindler"), starring Evan McGregor (Ewan McGregor) and Anna Friel (Anna Friel). IN 2001 Leeson enrolled at Middlesex University, where he received his degree in psychology. He currently devotes most of his time to company conversations on topics, Risk management, as well as speeches at various conferences and official dinners.
Maybe, few people in Great Britain and Ireland are so in demand as a speaker. Nick Leeson has repeatedly spoken not only in front of the corporate, but also in front of a university audience, including Oxford, Trinity College Dublin and University College Cork, Ireland. He was also invited to other countries many times., including Holland, New Zealand, South Africa and others. Leeson's candid account of his unique life experiences intrigues listeners, arousing their curiosity, serious interest, and sometimes sincere sympathy. After all, the death of Barings Bank and the role, played in it by Leeson, remain one of the most exciting dramas in modern financial history. For his performances, the former trader receives many thousands of royalties. By the way, not so long ago the agreement expired, according to which Leeson was obliged to transfer part of his earnings to the liquidators of Barings. Besides, he still trades financial instruments, but now only at my own expense.
In Leeson's personal life, there were also happy changes - in 2003 he married an Irish woman Leona Tormey for the second time (Leona Tormay). Leona, beautician by profession, already had two children - Kersti (Kersty) eight years old and four year old Alex (Alex), but the couple dreamed of a joint child. IN 2004 year their attempts were crowned with success: Nick and Leona have a son. Leeson currently lives with his family in the village of Barna., located near the capital of the county of Galway in the west of Ireland.
Crab, according to Leeson, should not take over a person and control his life. The more positive a person is, the more his chances of surviving. He also advises others not to “digest” the stress within themselves., as he himself did almost all his life. Now he talks to Leona and expresses that, what's on his mind. According to Lison, “In the case of cancer, as with other problems, You're amazed, how highly adaptable human beings are ”, and this makes a person able to “fight under the condition, that he is determined ".
In June 2005 year, the second book by Nick Leeson was published under the title “Back from the brink: combating stress " (“Back from Brink: Coping with Stress”). The book picks up the author's story there, where it ends in Rogue Trader and, besides telling about his deeply personal experiences, contains a detailed recording of conversations with leading psychologist Ivan Tyrrel (Ivan Tyrrell). The inclusion of these conversations is intended to show, as the story of Leeson's revival, whose mental and physical health has been undermined by intense and prolonged stress, correlates with problems, faced by almost everyone, – Relationships in the family, debts, struggle for success and status, resistance to severe illness.
Each chapter of the book contains an autobiographical part, dialogue between Leeson and Tyrrel, as well as a number of self-help techniques, including lists of questions and tables for self-study. Leeson writes, that his “experience, maybe, unusual, but it allows you to really look deeply into that, how stress can get out of control and take over each of us. The book will help people, feeling overwhelmed by life's difficulties ".
In April 2005 Years Leeson accepted the offer to become the commercial director of the Irish football club Galway United Football Club. He has a job, which suits him, and he leads life, which he likes. More than ten years after, how Barings burst, one of the most famous financial fraudsters in the world is still learning to look at himself and his life in a different light. “One of the most important tasks in my present life, – he says, – it's a change in mindset, attempts to find a positive side in current events. It's not always easy. Sometimes it is very difficult, but it can be done ”.
