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 Indonesian
stock exchange had grown so fast that the procedures for delivering
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 finally
caught up with the backlog. It was Leeson’s job to sort out the problems
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, discrepancies
would be isolated and dealt with separately, and the bank could
make its regulatory filings without delay. The bank intended for these discrepancies
to be recorded and closed out within a day, but Leeson realized
that Barings’ internal guidelines were not followed
tangled mess in the back office.3 The Indonesia office had a large number ofstock trades that did not reconcile, because the trading volume on the Indonesianstock exchange had grown so fast that the procedures for deliveringstock certificates could not keep up with the volume. The bank hadhundreds of small discrepancies between the stock certificates it held andthe certificates it was supposed to hold. The bank’s stock trading businesswas profitable, and most of the discrepancies were small. Sooner or later thevast majority of these discrepancies would be resolved as the paperwork finallycaught up with the backlog. It was Leeson’s job to sort out the problemsin 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, discrepancieswould be isolated and dealt with separately, and the bank couldmake its regulatory filings without delay. The bank intended for these discrepanciesto be recorded and closed out within a day, but Leeson realizedthat Barings’ internal guidelines were not followed
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