Tour guide broke the bank

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The Independent Online
NICK LEESON, the man who brought Barings to its knees, slipped on to the Singapore futures exchange trading floor as a glorified tour guide, according to the first book about the bank's collapse.

Leeson was never meant to be a trader but was given a badge so that he could show clients around. "Having an extra badge on the floor and another person in the booth made us look more respectable," said Mike Killian, the head of the global futures department. But Leeson had other ideas. He passed the ex- change's exam in late 1992 and was trading before the end of the year.

The move proved to be "a fatal mistake", Judith Rawnsley, a former researcher at Baring Securities (Japan), says in Going For Broke, her book which goes on sale tomorrow. Leeson's main job was as head of the back-office settlements department, which is usually kept strictly separate from the front-office trading. Holding both jobs enabled him to cover his trail as his losses mounted.

The Securities and Futures Authority had denied Leeson a licence to trade in London earlier that year, after he lied about an unpaid county court decision against him for pounds 2,426. Leeson had actually run up several debts that went to court, totalling pounds 10,047, although most of them had been paid off before he left for Singapore.

Everyone from Leeson and the Barings management through to the Bank of England and Singapore authorities comes in for criticism in Ms Rawnsley's book, but the clash of cultures between the staid merchant bank and its hot-shot securities arm is singled out for particular attention.

The successes and excesses of Baring Securities are the stuff of City legends. Christopher Heath, the company's first boss, hired people for their avarice and zaniness. "If you included fortune-telling among the talents listed on your curriculum vitae, or had climbed the highest mountain, fought with tigers or been a trapeze artist, you were definitely in with the chance of an interview," says Ms Rawnsley.

Once hired, staff were expected to work hard and play hard. The company had three holiday houses in Japan where the sales staff were expected to entertain clients. Ms Rawnsley recalls one of her colleagues ordering a pounds 500 bottle of wine at dinner, followed by a second for pounds 1,000.

Leeson stepped into this environment just as the merchant bankers were trying to get a grip on it. "The tiny broking firm that John Baring had paid pounds 6m for in 1984 had, in its first two years, become by far the largest chunk of a bank established before the French Revolution," says Ms Rawnsley. But when the Japanese bubble burst in 1990 and profits tumbled, a struggle for control of the sprawling empire ensued.

Directors of the company realised they had no idea what its financial situation actually was. As its clients withdrew from the market, Baring Securities began to do more trading on its own account, sparking a row with Baring Brothers about whether it could have more of the bank's capital to play with. Within a year, Baring Securities had a new boss, Peter Norris. But the controls he tried to implement came too slowly. Leeson's reporting lines were poorly defined.

Some directors of the bank questioned the huge profits Leeson was making in Singapore, but nothing was done. Ms Rawnsley concludes: "Barings was brought down by incompetence within the bank."

q 'Going For Broke', published by HarperCollins, pounds 14.99.