Nick Leeson

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Nicholas "Nick" Leeson (born February 25, 1967 in Watford , Hertfordshire ) is a former British derivatives trader who caused the collapse of Barings Bank , the UK's oldest investment bank , through risky speculation .

Live and act

Leeson lost his mother early and grew up with his father, a plasterer , in Watford. After the A-Levels , the British equivalent of the high school diploma, where he failed the math exam, he decided to do a bank training. At various institutes he mainly worked in the back office of trading departments such as Coutts & Company or Morgan Stanley , before moving to the renowned Barings Bank in July 1989 . Its newly established subsidiary, Barings Securities, expanded rapidly in East Asia during these years. In 1990 Leeson was transferred to Hong Kong , where he was entrusted with solving specific accounting problems as the head of a four-person team.

A little later he was transferred to Jakarta , where he met his future wife Lisa, who also worked for Barings Securities. In Jakarta, Leeson, who is known to be ambitious and hardworking, was able to quickly reduce the bank's outstanding securities balances and collect outstanding debts. In 1992 he was promoted to general manager of Barings Securities Singapore office , responsible for the recruitment of traders and the settlement and control of trades on the Singapore Exchange (Simex), but initially not for trading itself. After passing the trader exam At Simex, Leeson, who, according to his own admission, had long dreamed of a career as a trader with futures and options, also became chief trader, contrary to the usual practice in the investment banking industry. He was thus both a trader and controller of his own trading transactions.

The fact that this unusual construction was allowed was due to the fact that the responsibility of Barings Securities in Singapore was limited to the processing of customer orders and the low-risk arbitrage business , so that the management in London considered an additional controller to be unnecessary (“too little to do and too little expensive"). In addition, the management, who came from the traditional banking business, was not very familiar with the processes involved in stock exchange trading.

Nick Leeson began to speculate without authorization back in 1993. He quickly celebrated quick wins. Like every other stock exchange trader, he made mistakes, most of which were due to inexperienced employees. He hid the resulting losses in a previously unused account with the number 88888. Initially, he was able to repay them through prohibited proprietary trading. At the same time, he was able to show high surpluses, which soon made him a star trader. His position within Barings became invulnerable, and he satisfied inquirers from the head office with, in some cases, quite complex forgeries and excuses. In return, the incorrect postings on the named account accumulated until 1993 a deficit of six million pounds accumulated. More and more deficits were registered on account 88888. In early 1994 losses of £ 50 million had accumulated as he was celebrated as a rising star in London's financial sky.

Aside from brief interim phases, Leeson lost money with his speculations from the start. Hidden account losses swelled from £ 2m in late 1993 to £ 23m in late 1994. Leeson tried to compensate for the accumulated losses by increasingly daring speculations and in his spare time he was increasingly noticed by excessive alcohol consumption and mobbing. He spent a night in a sobering cell after showing his bare bottom to several Singapore Airlines stewardesses in a bar. Leeson was fined for "indecent self-exposure".

After the Kobe earthquake in 1995, the shortfall increased to around £ 400 million. On that day alone, he lost more than £ 55 million. Leeson eventually put everything on one card and tried to turn things around with extremely risky speculations. In vain, the losses rose dramatically within a few weeks, finally reaching 825 million pounds sterling and shortly afterwards resulted in the collapse of the traditional Barings Bank. On February 23, 1995, Leeson and his wife fled to Kota Kinabalu . In order not to be arrested in Singapore, he fled via Brunei and escaped in an odyssey via Brunei, Bangkok , Abu Dhabi to Frankfurt am Main .

On March 2, 1995, Leeson was arrested at Frankfurt Airport , extradited to Singapore on November 23, and a little later sentenced to six and a half years in prison for forgery, breach of trust and fraud, which he had to serve in the notorious Changi Prison in Singapore. After a colon cancer diagnosis, Leeson was released early in 1999; he lives in Ireland today. While still in prison he brought out an autobiography entitled Rogue Trader , which appeared in Germany under the title Das Billiardenspiel. The book was made into a film in 1999, starring Ewan McGregor as Nick Leeson and Anna Friel as his wife Lisa. In Germany the film ran under the name High Speed ​​Money (later German title Das Schnell Geld - Die Nick-Leeson-Story ). Nick Leeson himself was a guest at the premiere. The Australian band Rogue Traders named themselves after the film.

Today Leeson is increasingly involved in cancer research. He himself claims to have been cured of the disease. From April 2005 to February 2011 he was the manager of the Irish football club Galway United . In June 2005, his book Back from the Brink: Coping with Stress was published.

Nick Leeson divorced his wife Lisa while in prison. In 1999 he married Leona Tormay from Ireland, with whom he has three children.

Leeson's approach

He gained his first experience on the trading floor in arbitrage trading , in which price differences of the Nikkei 225 between different exchanges were exploited. Depending on the direction of the price difference, a trader in Singapore sold call or put options , and his colleague in Tokyo hedged the deal with an opposing trade. A small but steady stream of profits was guaranteed.

For Leeson, these small profits were soon too few. He believed he could foresee the movement of the market and decided not to have Tokyo hedge his business. According to his own information, he initially only booked faulty deals on 88888. B. inexperienced employees had sold paper instead of buying it as instructed by the customer. He was then forced to sell the options in order to use the option premiums to bring his cash position back to the amount that would have been expected in the bank's books without the incorrectly executed orders. He later began speculatively buying derivatives to support prices so that he didn't lose money on the options - he had bet on rising Japanese stock prices, but the Nikkei 225 was constantly down, congruently he was speculating on falling prices Japanese government bond futures , which rose steadily. As a result, he built - contrary to the guidelines of the bank and the industry - open positions of prohibited proprietary trading , which in turn led to higher losses, which he wanted to offset with further - larger - speculative positions, which made his overall position increasingly and faster and worse .

Since account 88888 was not recorded by the bank's internal reporting system - also thanks to computer manipulation - it was able to hide the accumulated losses from the bank's control authorities. As head of the settlement department, he had little difficulty covering his tracks. Later he faked business relationships with third parties by means of forged letters and faxes, on whose behalf he carried out the speculations or with which fictitious balances existed, which resulted in his figures being correct again. He benefited from the bank's very lax controls. Since he z. If, for example, his unauthorized speculative positions on SIMEX had to be backed with money as a result of " margin calls " and these funds had to be made available from London, it should have been obvious to a thinking center that Leeson's figures could not have been correct. Several internal audits omitted elementary account audits, even the external financial statements for 1994 were accepted despite the amateurishly disguised deficits (Leeson attributes this to the fact that management staff at the bank who were not familiar with derivatives trading did not question his nonsense statements because they did not want to appear ignorant) .

He finally tried to compensate for the rampant losses by investing in high-risk short straddles , which would have thrown high profits if the Nikkei had stabilized around 19,000 points. This speculation also failed. He alone could not reverse the downward trend and in his futile attempt only accumulated more and more loss-making derivatives. The losses of the Nikkei after the Kobe earthquake made this practice a disaster.

consequences

Leeson's miscalculation led to a global foreign exchange crisis because the British pound came under enormous pressure. It took almost a year for the financial markets to recover halfway. Singapore has imposed an entry ban on Leeson. Almost all banks in the world adjusted their control mechanisms after the momentous collapse.

literature

Movie

In 1999 the events surrounding Leeson and his actions were filmed under the title The Fast Money - The Nick Leeson Story . The film itself is based on the book Rogue Trader by Nick Leeson. On December 2, 1999, the film celebrated its German premiere. So far the film has been released on VHS and DVD .

See also

Web links

personal data
SURNAME Leeson, Nick
ALTERNATIVE NAMES Leeson, Nicholas
BRIEF DESCRIPTION British securities dealer, speculator, author
DATE OF BIRTH February 25, 1967
PLACE OF BIRTH Watford , Hertfordshire