Nicholas William Leeson was born on February 25th in Watford. He began his career as a clerk in a private bank called Coutts from where he moved to Morgan Stanley bank. After serving a couple of years there, Nick joined the Barings bank of Britain.
Slowly but firmly he worked his way up the ranks in Barings bank and was transferred to Jakarta to sort out a financial mess. Impressed by his work he was then appointed as general manager in 1989 in BSS (Barings Securities Singapore Limited) which obtained a seat in SIMEX (Singapore exchange). Initially concentrating only on equities, BSS had slowly started to diversify into the derivatives segment.
Leeson’s job was to hire a few traders and trade on behalf of the clients and firms within the Barings setup primarily in futures and options and also do riskless arbitrage of the price difference of Nikkei futures traded on Simex and Osaka Japan. Initially, Leeson did not trade himself but later appeared for an exam and started trading independently as well.
Leeson used an unauthorized account no.8888 to trade and continued to lose heavily into the markets. His speculative trades kept on accumulating losses which went from 2 million GBP to almost 200 million GBP in a span of two to three years. Unaware of this, the management of Barings Bank kept silent until 1995 when the cat was out of the bag.
In February 1995, Nick Leeson had created huge positions in the derivatives market. Half the open interest in Nikkei and 85% of the open interest in JGB futures was held by him. The markets traded against him and his eventual loss was a whopping 827 million GP. This bore a deep hole into the balance sheet of Barings Bank which was considered one of the biggest merchant banks of its time. It was also the Queen’s bank. The blow below the belt brought the Barings bank to its knees and within a matter of a few days, it was declared bankrupt.
Leeson fled from Singapore and was later arrested and sentenced to jail.
Leeson served his sentence and now lives with his second wife in Ireland.
Nick Leeson will be remembered in history as the rogue trader who caused the collapse of Barings bank.
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