Nick Leeson, the original rogue trader whose actions led to the collapse of the venerable Barings Bank and to a six-year prison sentence, yesterday warned that the culture of the City has spun out of control.
With banks reeling from numerous scandals and the London financial district under intense pressure to reform itself, Mr Leeson said that unless punishments are increased traders will continue to run amok.
"Rogue trading is on the increase. The latest scandals are just a sign that the culture is running riot without any checks in place.
"Every day you wake up and see something different," he told The Independent.
The most recent trading fiasco's include Kweku Adoboli's $2 billion of losses at UBS – he was held in custody but subsequently released -– the €4.9 billion racked up by Jérôme Kerviel of Société Gé*érale, whom the French authorities sentenced to three years in prison, and Bruno Iksil, the so-called London Whale who is at the centre of the huge trading losses at JPMorgan.
Mr Leeson said: "The inference in the Whale case is that his superiors told him to inflate prices. And in the Libor case, it looks like a degree of complicity with the regulators. It was one rogue element in my case, now it seems wider."
He thinks that the Libor case is the worst of the bunch. The investigation has already seen Barclays pay £290 million in fines; and the probe is widening daily.
As of yet, no individual has been directly accused of wrongdoing, and some that have left their banks have cropped up in new jobs elsewhere.
"If you can do something as obviously fraudulent as fixing rates and then get a new job, something is completely wrong with the system," he said.
Leeson became Barings' star trader in the early 1990s, making profit of £10 million for the bank in one year alone.
A market downturn saw him run up now puny looking losses of £800 million, ruining Barings in the process.
As such, his views may be taken with a pinch of salt. His point is that despite all of the scandals, the culture at large financial firms has only become wilder and more prone to abuse, with the amounts of money available so huge that a growing number of traders think it is worth taking large risks.
Mr Leeson added: "The rules may be tighter but the behaviour is getting worse. There should be tougher penalties. At the moment there is contempt and disdain for the rules."
Mr Leeson pleaded guilty to fraud. He was diagnosed with colon cancer but later recovered. He now lives in Ireland and earns fees for after-dinner speaking.
His own salary makes that point. It was a relatively meagre £50,000 a year, on which he once earned a bonus of £130,000.
These days, the rewards on offer to top traders run comfortably into the millions, with hedge fund bosses earning even more than this.
Mr Leeson, a working-class boy from Watford and the son of a plasterer, had hidden the losses in an obscure account called Error Account 88888.
When he was discovered, he and his wife went on the run, first to Borneo, and then to Frankfurt, but he was arrested and then extradited from Germany back to Singapore.Reuse content