Twenty years ago, the world of rogue trader Nick Leeson crashed spectacularly. When it was revealed that Leeson had gambled away hundreds of millions, stock markets reacted with sheer terror and his employer, Barings Bank, was torn to shreds and left in pieces. Fergus Ewbank speaks to the former ‘rising star’
With his name on the front page of every newspaper, Leeson, the man who ‘broke the bank’, fled the scene of his crime, leaving a note for his employer that said simply ‘I’m sorry’. As the incident came crashing into the public eye, a mixture of opinions about Leeson began to emerge. Some saw him as a ‘brilliant’ trader, a confident 28-year-old who had been responsible for 10% of Barings’ total earnings.
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Others saw Leeson as a ‘high flyer’, someone who had carelessly squandered the fortunes of others for his own gain. Twenty years on and the Leeson of today is neither of those things; both out of obligation and out of choice, he keeps a measured distance from the industry. Now very much reformed, he possesses a clear understanding of "what is right and what’s appropriate". He views his past actions as the result of a lack of clarity, on his own part and that of the industry as a whole.
A few months after the incident back in 1995, Chancellor Kenneth Clarke presented a report on bank regulatory systems to the House of Commons. The report blamed the fall of Barings on ‘serious problems of controls and management failings within the Barings group’. Obviously, the consequences of wrongdoing weren’t, and for him still aren’t, spelled out clearly enough.
In 20 years, what has changed in the industry, if anything?
Reflecting upon his own failings in an attempt to guide the actions of others, Leeson fears the same underlying problems exist today as they did back then. He sees the regulatory systems in place today as futile, "everything that has been tried over the last 20 years is not moulding the culture in the way that it should be." For Leeson, the current practice of fining banks is ineffectual, he points out that there has been £166bn ($246bn) worth of fines made in the last six years. "Has it really changed anything?" he asks, "the evidence suggests that it has not."
Leeson believes that the current regulatory system needs to undergo change but wonders if, really, such a thing could ever happen.
He says: ‘The capitalist animal that we built in financial centres around the world is always going to be a problem from time to time."
Whatever the route of a problem – be it a rogue trader or a product that doesn’t work as intended – for Leeson, the controls are just not good enough. "There is no silver bullet that is going to make everything ok," he says, believing that the only real solution is to mitigate the propensity for problems "as much as you can, as quickly as you can".
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By GlobalDataWithout a serious upheaval of current systems of regulation, Leeson views another debacle as inevitable. "We’re talking about something that is always going to blow up from time to time, hopefully never again to the extent that we saw in 2008."
The problem is an inconsistency within banking culture as a whole, the only way to address this would be to, in Leeson’s words, "rip up the rulebook and start again."
However, this is a century old rulebook and while, from the outset, the public become increasingly suspicious of the banks, on the inside it’s a different story. Leeson believes "there’s a lack of appetite for change"; the problem is one that is deeply ingrained within the system under which we live, trickling all the way down from the top to the bottom. As Leeson puts it: "If you’re a politician and your party is being largely financed by a huge hedge fund or a very successful financier, why would you have any desire for change?"
What is Leeson doing now?
Often speaking at banking events, Leeson uses his own experiences to advise other bankers against making the same mistakes he did. His admission of the wrongdoings he made is genuine; he is under no false impression when it comes to the fall of Barings, he was the spark that ignited the flames.
The collapse of Barings "is a story of negligence and incompetence on a grand scale, with my incompetence and negligence is very much at the forefront", he openly admits. "Sometimes you have to admit your mistakes. I do that openly, I never lecture, it’s about storytelling, and that story brings with it some serious messages that people can learn from."
Leeson’s own culpability, his self-admission, has allowed him a good deal of respect within an industry he once brought crashing down. "I never get a problem from other bankers," he says, "if you stand up and tell lies, you get seen through. I told enough lies years ago and I’m not in that game anymore." Despite all the embarrassment and strife it eventually brought him, Leeson clearly misses the industry. Crooked though he may once have been, there’s could be no arguing Leeson’s talent for the market – something that, despite his wrongdoings, he will always be respected for.
Leeson knows he cannot, and will never, return to the industry. For him, banking "was the thing that made me sick, ending up with me being in jail." Allowed to run wild, then torn forcibly from his habitat and placed in captivity, Leeson has no desire to once again tread the floors of the banking institutions – the great monetary Savannah.
Now tamed, he sees the industry as impossible to control: you can tame a lion but you can’t single-handedly take on the entire pride.
