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Last Updated: Thursday, 24 January 2008, 19:55 GMT
What it's like to lose millions of dollars
Nick Leeson
Nick Leeson is known around the world for his rogue trading

It might be a dubious title to hold, but whether he likes it or not, Nick Leeson is still the world's most famous rogue trader.

Now the painful insight of this former financial trader is in demand once again, as the banking world tries to comprehend the "massive fraud" uncovered by French bank Societe Generale.

The bank says alleged activity by a Paris-based trader caused it to incur a loss of 4.9bn euros ($7.1bn; 3.7bn). The damage, the bank says, was based on simple transactions, but concealed by "sophisticated and varied techniques".

These losses are four times greater than those made by Mr Leeson, the rogue trader who famously brought down Barings Bank in 1995, for which he was sentenced to six-and-a-half years in a Singapore jail.

Mr Leeson is, of course, expertly placed as to how the perpetrator of this latest bout of rogue trading will be personally affected by the situation.

"The thing that I wanted, and I'm sure the thing this guy wanted, was success," he told the BBC.

He survived for one day, he survived for a week, he survived for a month and eventually you start to believe that, okay, it's not quite as bad as it was
Nick Leeson

"Success was the thing that drove him on. It's a fundamental part of the markets and the people that work within it.

"Probably his biggest fear is the fear of failure, as it was mine, as it probably still is today. When he got himself into the situation there would have been a degree of panic.

"He survived for one day, he survived for a week, he survived for a month and eventually you start to believe that, okay, it's not quite as bad as it was.

You've got a degree of time to try and unfurl yourself from this situation.

"That's certainly what I tried to do at Barings and that would have been his motivation. This isn't about him getting rich, or getting rich quick."

Mr Leeson said there were times during his rapidly-deteriorating situation at Barings that he "wanted to shout from the rooftops... this is what the situation is, there are massive losses, I want it to stop.

"But for some reason you're unable to do it."

This was in part, he suggested, because "everybody around you, your nearest and dearest, gets caught up in the success story" and it becomes so very difficult to admit failures.

Loopholes remain

Mr Leeson said he was "shocked" by the size of the losses involved, but not by the fact that a rogue trader had been discovered.

"I think rogue trading is probably a daily occurrence amongst the financial markets," he said.

Nick Leeson in 1995
Mr Leeson was eventually imprisoned in Singapore

"I get asked this question a lot, about whether these sort of things can occur again.

"There are occasions where these sorts of scandals will occur in different banks and in different financial institutions, but I never for one minute believed that it would get to this degree of magnitude and this degree of loss."

Mr Leeson dismissed any suggestion that banks had introduced sufficient measures to prevent rogue traders from doing their considerable damage.

"They haven't closed down the loopholes. The banks... focus on making the money, they're not too interested in trying to save it.

"The money gets thrown at the front end of the business where the money is being made, at the traders and the systems that they're trading with.

"Not enough focus goes on those risk management areas, those compliance areas, those settlement areas, that can ultimately save them money.

"It's a very, very difficult thing to get across... to a board, when you're trying to convince them that if you invest now in these controls and in these systems, that it will ultimately repay you.

"What they're looking for is profit, they're looking for that profit now, and that tends to be where the money is directed."

You're still looking at a situation where the systems and controls aren't good enough, the people in place to look after those systems and controls simply aren't good enough either
Nick Leeson

BBC Business Editor Robert Peston said that, according to Societe Generale, the fraud was carried out in "plain vanilla futures hedging on European equity market indices".

But our correspondent said that bankers cannot understand how this could have happened, as for a trader in "plain vanilla" index futures to exceed his limits to that extent should be impossible, because of existing controls.

Mr Leeson offers a simple explanation.

"You're still looking at a situation where the systems and controls aren't good enough, the people in place to look after those systems and controls simply aren't good enough either."

Mr Leeson suggested that there must have been a number of staff within the bank's system who "weren't doing their jobs properly", and he also scotched reports that the losses had been incurred over a brief period of time.

"It can't have done. The guy was apparently trading CAC futures and DAQ futures which are exchange traded products, that everybody can see the positions that are open on the exchange.

"I don't think this was the only thing that he was trading, but this has to have happened over a long period of time."

Societe Generale
Societe Generale bank is still coming to terms with its losses

He went on to say that the same scenario occurred at Barings, and that his own "incompetence and negligence" was "at the forefront of that".

After his early release from prison in 1999, Mr Leeson returned to the UK, split up with his first wife, took up speaking engagements to help rebuild his life and settled in Galway, later became commercial director of Galway United football club.

He also wrote a book, and said that he still does not take up "everything I'm offered", only taking up those opportunities he is "comfortable with", so he clearly is still a man for whom the banking world and media still holds a fascination.

But Barings ceased to exist, unable to recover from the 850m that Mr Leeson lost it.

This rogue trader's life was re-fashioned, then - but the fate of Societe Generale's member of that dishonourable club, and of the bank itself, is still unfolding.



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