Word: leeson
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There were no hedges, no bets the other way to protect Barings' huge exposures. Leeson attempted to trade in Japanese government bonds as well, but these too incurred large losses. In what apparently was a breakdown in internal controls at Barings' treasury, the bank continued to fund Leeson's activities, going as far as taking out an $850 million loan in the four weeks leading up to the collapse...
Barings may have wanted to look the other way. They had allowed Leeson to remain chief trader while also being responsible for settling his trades. At most banks the two jobs are split because allowing a trader to settle his own deals makes it simpler for him to hide the risks he is taking-or the money he is losing. As early as March 1992, an internal fax warned that "we are in danger of setting up a structure which will prove disastrous, in which we could succeed in losing either a lot of money, client goodwill or both...
Despite this conclusion, Anthony Hawes, acting as a troubleshooter for the Barings inner circle in London, flew to Singapore on Feb. 8 to talk to Leeson and his team. On Monday, Feb. 20, Leeson's regional supervisors in Tokyo asked him to reduce the company's holdings of the Nikkei contracts. "It's almost getting to be a problem," a Barings top manager explained to a friend. No one yet suspected the crisis awaiting the company in account No. 88888. By the time internal auditors did suspect, the amount of credit extended to cover those positions had exceeded the bank...
...EVIDENCE SUGGESTS THAT LEESON began preparing for the end soon after Hawes arrived in Singapore. On Feb. 15, Leeson's wife Lisa called the Four Winds moving company. Diana Massimiani, Four Winds' assistant manager in Singapore told Time that the Leesons wanted to move their belongings to Kent in southeast England. "She told me she would need storage as they were going away and didn't know when they would reach Kent." Even before that, Leeson had sold his black Rover sports car and was reportedly leasing a white Mercedes. By Friday, Feb. 24, Nick and Lisa Leeson would...
...about the same time, Peter Baring, chairman of the bank, reportedly received a faxed letter from Leeson. According to the Independent, the trader apologized, provided a detailed account of his dealings and said "he doubted the two would ever meet again." When a weekend attempt by the Bank of England to round up a rescuer failed, Baring hinted that a conspiracy had led to the collapse of the institution his family established 232 years ago. But, says Emma Davey, managing editor of Futures and Options World: "Baring didn't have a clue what this is all about. There...