Nicholas (“Nick”) William Leeson was relaxing at a luxury resort in Malaysia when he heard that Barings Bank PLC, 1 Britain’s oldest bank, had lost $1.2 billion (£860 million) and was in administration (i.e., Chapter 11 bankruptcy). He was shocked, but Leeson should not have been: it was his mas- sive speculative losses on the futures market over a brief three-year period that wiped out the net worth of this ven- erable bank.
Leeson worked at the Singapore branch of Barings Bank PLC, the blue-blooded British merchant bank founded in 1763 that catered to royalty and was at the pinnacle of the London financial world. Among its many accomplishments over the centuries, Barings financed both the Louisiana Pur- chase in 1803 and the Napoleonic Wars. But the road to suc- cess was not always smooth. The bank endured both wars and depressions, and it overcame near-bankruptcy in 1890, surviving only because it was bailed out at the last minute by the Bank of England. In spite of these sporadic periods of turmoil, Barings was always one of the most well-placed
and highly regarded players in London’s financial hub. How ironic that this centuries-old bank would be toppled by one man operating out of Barings’ remote Singapore affiliate.
Leeson was the chief trader for Barings’ Singapore affiliate, dealing mainly in futures contracts on both the Nikkei 225 index2 and 10-year Japanese government bonds. Due to his huge trading profits, Leeson earned a reputation among Barings’ management in London, Tokyo, and Singapore as a star performer, and he was given virtually free rein. Many of Barings Bank’s top management believed that Leeson possessed an innate feel for the markets, but the story of this rogue trader reveals that he had nothing of the sort. How, one wonders, could Barings’ management have been so seriously mistaken and for so long?
This chapter addresses two main questions about the Barings collapse: why did the bank give Leeson so much discretionary authority to trade, allowing him to operate without any effective trading restraints by managers and internal control systems; and what trading strategy did Leeson employ to lose so much in such a short time?
Nick Leeson (Exhibit 7.1) came from humble origins compared to most of Barings’ officers. He had no family ties to the nobility, did not attend Eton, and did not serve in the Coldstream Guards. The son of a Watford plasterer, Leeson’s first job at Barings was as a clerk, but he rose swiftly. His big break came when he was sent to the Barings’ Indonesian office to sort out a
tangled mess in the back office.3 The Indonesia office had a large number of stock trades that did not reconcile, because the trading volume on the In- donesian stock exchange had grown so fast that the procedures for deliver- ing stock certificates could not keep up with the volume. The bank had hundreds of small discrepancies between the stock certificates it held and the certificates it was supposed to hold. The bank’s stock trading business was profitable, and most of the discrepancies were small. Sooner or later the vast majority of these discrepancies would be resolved as the paperwork fi- nally caught up with the backlog. It was Leeson’s job to sort out the prob- lems in Indonesia so branch operations ran smoothly.
Barings’ internal guideline was to post discrepancies to a special account, called the “88888 Account.” That way, the bank’s books would balance, dis- crepancies would be isolated and dealt with separately, and the bank could make its regulatory filings without delay. The bank intended for these dis- crepancies to be recorded and closed out within a day, but Leeson realized that Barings’ internal guidelines were not followed.
Leeson did such a good job cleaning up the back-office problems in In- donesia that the bank promoted him. His rise after that was meteoric. In January 1992, Barings assigned Leeson to its newly opened Singapore branch; shortly thereafter, he became head of derivatives trading at Barings’ Singapore office, Barings Futures Singapore (BFS). Leeson’s rise to promi- nence was reflected in his annual bonuses, which were more than twice as large as his annual salary.4
While in Singapore, Leeson focused his trading activities on futures con- tracts in three major markets: the Japanese Nikkei 225 stock index, 10-year Japanese government bonds, and euro-yen deposits. Because they were traded simultaneously on the Osaka Securities Exchange (OSE) and the Singapore International Monetary Exchange (SIMEX), Leeson’s job eventu- ally became one of taking advantage of arbitrage opportunities between the two markets. But Leeson was not just arbitraging, and between July 1992 and February 1995 (about two and a half years), he incurred losses of over $1 billion. How was this possible?
While he was working on reconciling the discrepancies in Indonesia, Leeson learned that the discrepancies account (the “88888 Account”) did not appear in reports used to control traders. Not surprisingly, they did go into other reports, such as position statements to the exchanges for margin5 calculations, but internally, this information was prepared less frequently, and it went through different channels to employees at the bank who had little familiarity with trading.
For many types of financial transactions and banking operations, there are temporary imbalances. Cash management systems often allow intra-day overdrafts, and these overdrafts can be large. For instance, a client may send out wire transfers every morning and receive incoming wire transfers every afternoon or may make transfers from different time zones. Every cash management account is supposed to balance at the end of the business day, and if a customer’s account shows an overdraft, the amount is sup- posed to be less than the customer’s credit limit. In that same spirit, it is log- ical that securities trading systems should allow overdrafts that match the length of the delivery period for securities. For example, U.S. stockbrokers allow their customers to sell a stock and then immediately use the proceeds to buy a different one even though the funds from the sale will not arrive until several days later. The customer’s account is potentially in overdraft,
ognizing exposures, but equally important, they create opportunities for clever and unscrupulous employees to figure out how to take advantage of the permissive treatment of temporary imbalances. Nick Leeson was cer- tainly both clever and unscrupulous.
Barings had strict trading limits and believed that it was diligently moni- toring all its traders to make sure they did not exceed their limits, but the bank’s systems were not prepared for the level of fraud and misrepresenta- tion that Leeson committed, and Barings was not aware of the secret pas- sageway Leeson found to its crown jewels. In July 1992, shortly after being assigned to Singapore and only a couple of days after Barings gained mem- bership on SIMEX, Leeson opened an 88888 Account, just like the one he uncovered in Barings’ Indonesia branch.7 By 1993, just a year after his ar- rival, Leeson began reporting extraordinary profits.
From the perspective of Barings London, there was nothing suspect about Leeson setting up the 88888 Account. After all, a separate account for set- tling transaction discrepancies was normal, but what went on in this ac- count was apparently off the radar screen of Leeson’s managers in London and Singapore. Leeson set himself the goal of becoming the protector of his newly discovered door to fortune and fame. Within a week of opening the 88888 Account, he had its reporting software changed so that transactions in the account did not appear on the daily internal performance reports.8
You may ask, “What well-managed bank would allow its chief trader to be in charge of the back office, as well?” The answer is easier to understand once you realize that, initially, Barings’ Singapore branch was supposed to be executing orders placed exclusively by Barings affiliates worldwide on behalf of their customers. It was some time afterward that BFS also began to conduct independent arbitrage transactions, but from the standpoint of Bar- ings London, this new line of business posed no major security breach. BFS was not supposed to be involved in any trading for the house’s account, so Barings’ management might have reasoned that any loss of control by put- ting Leeson in charge of the front and back offices was offset by the cost sav- ings of having one person cover two tasks.
As competition for customers became keener and profits declined, BFS gradually began to take on positions of its own. Leeson was put in charge of Singapore’s arbitrage activities, which meant he was supposed to have large blocks of offsetting Nikkei 225 futures contracts traded simultaneously on
the OSE and SIMEX. Because Leeson still controlled the 88888 Account, he was able to assign any trades he desired to it—and he did. As a result, an in- spection of Leeson’s normal trading activity showed moderate amounts of futures contracts with positions and activity within authorized trading limits.
Leeson used the 88888 Account in two major ways. Whenever he traded more contracts than his limits allowed and whenever he had losing trades that would have blemished his reputation as a brilliant trader, Leeson as- signed the extra trades and the losing transactions to the 88888 Account. He also used the account to conceal the fact that he was speculating and not arbitraging. Remember that Leeson was supposed to be long and short in approximately equal amounts on the different exchanges, and it was for this reason that his supervisors allowed him to have such large positions. In reality, he was long in amounts that were two or three times larger than his supervisors realized, and he did not have short positions to offset these enormous exposures.9 Leeson’s trades in the 88888 Acc
William Leeson นิโคลัส ("นิค") ได้พักผ่อนในรีสอร์ทหรูในมาเลเซียเมื่อเขาได้ยินว่า Barings ธนาคารจำกัด(มหาชน) ธนาคารเก่าแก่ที่สุดของสหราชอาณาจักร 1 มีสูญ 1.2 พันล้านเหรียญ (860 ล้านปอนด์) และในการดูแล (เช่น 11 บทล้มละลาย) เขาตกใจ แต่ไม่ควรได้รับ Leeson: มันขาด sive มาสเขาเก็งกำไรในตลาดล่วงหน้าผ่านย่อระยะเวลาสามปีที่เช็ดออกมูลค่าสุทธิของธนาคารนี้เวน-erable Leeson ทำงานที่สาขาสิงคโปร์ของ PLC ธนาคาร Barings, blue-blooded อังกฤษค้าธนาคารก่อตั้งขึ้นใน 1763 ที่สบายได้พินนาเคิลในลอนดอนการเงินโลก นี่เป็นความสำเร็จหลายอย่างมากกว่าอื่น ๆ Barings เคหะเชสเทนแบบรัฐลุยเซียนา - ใน 1803 และครา แต่ถนน suc cess ไม่ค่อยราบรื่น ธนาคารทนสงครามและทราย และมัน overcame ใกล้ล้มละลายใน 1890 รอดเนื่องจากมันถูกอย่างไร้ร่องรอยในนาทีสุดท้าย โดยธนาคารของประเทศอังกฤษ แม้ว่าเหล่านี้มีรอบระยะเวลาของความวุ่นวาย Barings ถูกเสมอหนึ่งในที่สุดแห่ง และผู้เล่นที่สูงถือในลอนดอนเป็นฮับทางการเงิน ว่าเรื่องที่จะ toppled ศตวรรษธนาคารนี้ โดยคนหนึ่งที่ปฏิบัติการออกจากของ Barings พันธมิตรสิงคโปร์ระยะไกล Leeson เป็นประธานผู้ประกอบการค้าสำหรับพันธมิตรของ Barings สิงคโปร์ จัดการส่วนใหญ่ในสัญญาซื้อขายล่วงหน้า index2 คไก 225 และพันธบัตรรัฐบาลญี่ปุ่น 10 ปี เนื่องจากกำไรขายเขาใหญ่ Leeson ได้รับชื่อเสียงผู้จัดการ Barings' ในลอนดอน โตเกียว และสิงคโปร์แสดงดาว และเขาได้รับจริงบังเหียนฟรี ของผู้บริหารระดับสูงของ ธนาคาร Barings เชื่อว่า Leeson ต้องมีความรู้สึกเป็นข้อสอบสำหรับการตลาด แต่เรื่องราวของอันธพาลคนนี้เผยว่า เขามีอะไรของการเรียงลำดับ วิธี หนึ่งในสิ่งมหัศจรรย์ จัดการ Barings' มีผิดอย่างจริงจังดังนั้น และดังนาน บทนี้อยู่สองคำถามหลักเกี่ยวกับยุบ Barings: ทำไมได้ธนาคารให้ Leeson มากอำนาจ discretionary ค้า อนุญาตให้เขาไม่ restraints ค้าใด ๆ มีประสิทธิภาพโดยผู้บริหารและระบบการควบคุมภายใน และกลยุทธ์สิ่งค้าได้ Leeson จ้างสูญเสียมากในเวลาสั้นเช่น นิค Leeson (7.1 แสดง) มาจากต้นกำเนิดอีกเมื่อเทียบกับทั้งเจ้าหน้าที่ของ Barings เขามีความสัมพันธ์ในครอบครัวไม่ให้ขุนนาง ไม่สนใจดิอีตัน และไม่ได้ใช้ในยาม Coldstream บุตรของ plasterer วัต Leeson เป็นงานแรกที่ Barings ที่เป็นเสมียนเป็น แต่เขากุหลาบอย่างรวดเร็ว มาพักที่เขาใหญ่เมื่อเขาถูกส่งไปที่สำนักงานอินโดนีเซีย Barings' การเรียงลำดับออกเป็น tangled mess in the back office.3 The Indonesia office had a large number of stock trades that did not reconcile, because the trading volume on the In- donesian stock exchange had grown so fast that the procedures for deliver- ing stock certificates could not keep up with the volume. The bank had hundreds of small discrepancies between the stock certificates it held and the certificates it was supposed to hold. The bank’s stock trading business was profitable, and most of the discrepancies were small. Sooner or later the vast majority of these discrepancies would be resolved as the paperwork fi- nally caught up with the backlog. It was Leeson’s job to sort out the prob- lems in Indonesia so branch operations ran smoothly. Barings’ internal guideline was to post discrepancies to a special account, called the “88888 Account.” That way, the bank’s books would balance, dis- crepancies would be isolated and dealt with separately, and the bank could make its regulatory filings without delay. The bank intended for these dis- crepancies to be recorded and closed out within a day, but Leeson realized that Barings’ internal guidelines were not followed. Leeson did such a good job cleaning up the back-office problems in In- donesia that the bank promoted him. His rise after that was meteoric. In January 1992, Barings assigned Leeson to its newly opened Singapore branch; shortly thereafter, he became head of derivatives trading at Barings’ Singapore office, Barings Futures Singapore (BFS). Leeson’s rise to promi- nence was reflected in his annual bonuses, which were more than twice as large as his annual salary.4 While in Singapore, Leeson focused his trading activities on futures con- tracts in three major markets: the Japanese Nikkei 225 stock index, 10-year Japanese government bonds, and euro-yen deposits. Because they were traded simultaneously on the Osaka Securities Exchange (OSE) and the Singapore International Monetary Exchange (SIMEX), Leeson’s job eventu- ally became one of taking advantage of arbitrage opportunities between the two markets. But Leeson was not just arbitraging, and between July 1992 and February 1995 (about two and a half years), he incurred losses of over $1 billion. How was this possible? While he was working on reconciling the discrepancies in Indonesia, Leeson learned that the discrepancies account (the “88888 Account”) did not appear in reports used to control traders. Not surprisingly, they did go into other reports, such as position statements to the exchanges for margin5 calculations, but internally, this information was prepared less frequently, and it went through different channels to employees at the bank who had little familiarity with trading. For many types of financial transactions and banking operations, there are temporary imbalances. Cash management systems often allow intra-day overdrafts, and these overdrafts can be large. For instance, a client may send out wire transfers every morning and receive incoming wire transfers every afternoon or may make transfers from different time zones. Every cash management account is supposed to balance at the end of the business day, and if a customer’s account shows an overdraft, the amount is sup- posed to be less than the customer’s credit limit. In that same spirit, it is log- ical that securities trading systems should allow overdrafts that match the length of the delivery period for securities. For example, U.S. stockbrokers allow their customers to sell a stock and then immediately use the proceeds to buy a different one even though the funds from the sale will not arrive until several days later. The customer’s account is potentially in overdraft,
ognizing exposures, but equally important, they create opportunities for clever and unscrupulous employees to figure out how to take advantage of the permissive treatment of temporary imbalances. Nick Leeson was cer- tainly both clever and unscrupulous.
Barings had strict trading limits and believed that it was diligently moni- toring all its traders to make sure they did not exceed their limits, but the bank’s systems were not prepared for the level of fraud and misrepresenta- tion that Leeson committed, and Barings was not aware of the secret pas- sageway Leeson found to its crown jewels. In July 1992, shortly after being assigned to Singapore and only a couple of days after Barings gained mem- bership on SIMEX, Leeson opened an 88888 Account, just like the one he uncovered in Barings’ Indonesia branch.7 By 1993, just a year after his ar- rival, Leeson began reporting extraordinary profits.
From the perspective of Barings London, there was nothing suspect about Leeson setting up the 88888 Account. After all, a separate account for set- tling transaction discrepancies was normal, but what went on in this ac- count was apparently off the radar screen of Leeson’s managers in London and Singapore. Leeson set himself the goal of becoming the protector of his newly discovered door to fortune and fame. Within a week of opening the 88888 Account, he had its reporting software changed so that transactions in the account did not appear on the daily internal performance reports.8
You may ask, “What well-managed bank would allow its chief trader to be in charge of the back office, as well?” The answer is easier to understand once you realize that, initially, Barings’ Singapore branch was supposed to be executing orders placed exclusively by Barings affiliates worldwide on behalf of their customers. It was some time afterward that BFS also began to conduct independent arbitrage transactions, but from the standpoint of Bar- ings London, this new line of business posed no major security breach. BFS was not supposed to be involved in any trading for the house’s account, so Barings’ management might have reasoned that any loss of control by put- ting Leeson in charge of the front and back offices was offset by the cost sav- ings of having one person cover two tasks.
As competition for customers became keener and profits declined, BFS gradually began to take on positions of its own. Leeson was put in charge of Singapore’s arbitrage activities, which meant he was supposed to have large blocks of offsetting Nikkei 225 futures contracts traded simultaneously on
the OSE and SIMEX. Because Leeson still controlled the 88888 Account, he was able to assign any trades he desired to it—and he did. As a result, an in- spection of Leeson’s normal trading activity showed moderate amounts of futures contracts with positions and activity within authorized trading limits.
Leeson used the 88888 Account in two major ways. Whenever he traded more contracts than his limits allowed and whenever he had losing trades that would have blemished his reputation as a brilliant trader, Leeson as- signed the extra trades and the losing transactions to the 88888 Account. He also used the account to conceal the fact that he was speculating and not arbitraging. Remember that Leeson was supposed to be long and short in approximately equal amounts on the different exchanges, and it was for this reason that his supervisors allowed him to have such large positions. In reality, he was long in amounts that were two or three times larger than his supervisors realized, and he did not have short positions to offset these enormous exposures.9 Leeson’s trades in the 88888 Acc
การแปล กรุณารอสักครู่..