In 1995, one young trader in Singapore broke a bank that had survived for 233 years. His name was Nick Leeson, and the bank was Barings. This is the story of how one man's hidden losses grew bigger than everything the bank owned, and why nobody in London noticed until it was too late. It began with a decision in April 1992. Barings sent Leeson to run its small trading office in Singapore. He was given two jobs that banks normally keep apart. He placed the trades, and he also settled them, which meant checking that they were recorded correctly. In effect, Leeson could mark his own homework. Managers in London believed his staff would only carry out client orders, so they saw no danger in it. Nobody asked what would happen if the man marking the homework started to fail.
Nick Leeson Breaks Barings Bank
Nick Leeson hid losses in secret account 88888 and sank 233-year-old Barings Bank, leaving a hole of 827 million pounds.
Marking His Own Homework
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Frequently Asked Questions
What was account 88888 in the Barings collapse?
Account 88888 was a secret error account that Nick Leeson opened in Singapore on July 3, 1992. He used it to hide his losing trades, and he had the system changed so its data was never reported to London. By the end of 1994 it held losses of 208 million pounds.
Why did nobody at Barings notice what Leeson was doing?
Leeson controlled both the trading and the settlement of his own trades, so he could check his own work. London managers also saw him as a star trader and ignored a 1994 internal audit warning. They sent him cash for margin payments without checking his claims or looking at account 88888.
How did the Barings collapse end?
Barings was declared insolvent three days after Leeson fled on February 23, 1995. The bank ING bought it for 1 pound and took on all its liabilities. Leeson was sentenced to six and a half years in a Singapore prison.
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