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?