Nick Leeson — The Barrow Boy Who Bankrupted a Bank

Morning folks, and welcome to today’s episode: Nick Leeson — The Barrow Boy Who Bankrupted a Bank. Now that’s some alliteration.

This is a story I was completely enthralled by when it broke back in 1995. Leeson’s face was splashed across every newspaper in the days after he disappeared, having brought down Barings Bank by concealing massive losses and then trying to trade his way out of trouble — only to end up losing £827 million — about $1.3 billion.

It was nearly 30 years ago now, so I’d forgotten most of the details, which made revisiting it all the more fun. It’s a cracking story. Enjoy.

Nick Leeson was born on February 25th, 1967, in Watford, a commuter town just outside London.

His father, Bill, was a self-employed plasterer, so construction work — inconsistent, dependent on the next job. His mother was a nurse. Steady work, but poorly paid back then. There was enough money to get by, but never much spare. No real financial cushion.

Growing up like this creates a constant awareness of money — or rather, an awareness of not having money. And I suppose, without psychoanalysing too much, for a young person living in that kind of household, it gave Leeson an ambition to earn more than just enough.

Leeson goes to a local comprehensive school where he does well socially but not so well academically, and in his A-level maths he gets the lowest possible grade. That matters for two important reasons.

First, later in his career, Leeson would end up trading derivatives — specifically futures and options. These products are heavily mathematical and involve non-linear risk, where small market moves can quickly turn into very large losses.

Leeson never really understood that. He grasped simple, proportional relationships — routines and patterns — where if the market went up, you made money, and if it went down, you lost money.

Second, in the UK education system, weak A-levels — especially in maths — meant there was no traditional route into college courses that would, in turn, get you into the top roles in finance.

In 1985, aged eighteen, he decided not to go to university and instead joined Coutts — a very traditional, private bank with old-money clients. It’s the bank of the Royal Family, so it manages the money of some of Britain’s wealthiest individuals and institutions — a world of inherited wealth and discretion, far removed from Leeson’s background. So a lot has been made of this — that Leeson had some sort of resentment towards the upper-class people that he came across while in banking — and indeed, in his own book this class divide is prominent in the opening chapter — but I saw an interview with Leeson where he confessed that he didn’t write that particular chapter, and he actually never had any issues with any of his upper-class colleagues.

Leeson joins the clearing department. Back-office work. Processing cheques, updating accounts, balancing ledgers.

This is where he learns how the financial system actually works.

He learns that small discrepancies happen all the time, so banks use suspense accounts — temporary holding accounts — to park differences while they’re investigated and resolved.

The systems were old and manual. Paper-based. Dependent on people paying attention. And open to abuse.

Now at this time, the mid-80s, the City of London is changing fast. Under Margaret Thatcher’s government, financial markets were deregulated to make London more competitive with New York and to modernise what was seen as an outdated, clubby system.

This culminated in what became known as the “Big Bang” on October 27th, 1986. Fixed commissions are scrapped. Foreign banks are allowed in. Trading becomes faster, more aggressive.

Banks suddenly needed large numbers of traders. The traditional pipeline for the financial institutions were public schools and elite universities — but they can’t supply enough people. So firms start hiring a different type of trader: loud, aggressive, street-smart, from working-class backgrounds.

These “barrow boys”, as they’re called, don’t fit the old City image, but they’re good at trading and making money.

From the back office at Coutts, Leeson watches this happen. He sees people with similar backgrounds to his moving into trading roles, earning big money.

So he starts looking for ways that might get him into trading.

In 1987, Leeson left Coutts and went to Morgan Stanley, working in the “Futures and Options” settlements department. So still in the back office — and he learned about margin calls — the requirement to post cash daily to cover potential losses — mark-to-market valuation, and clearing houses.

During two years at Morgan Stanley, he dealt with the “paper ticket” system — traders wrote tickets, clerks typed them in.

Leeson quickly learned that traders made mistakes all the time — wrong prices, wrong sizes. His job was to check records and fix the paperwork.

And that’s when he realised something important. The back office decided what was real. If settlements confirmed a trade, it existed. If they called it an error, it didn’t. The traders made money — but the back office controlled the record.

And while Leeson was getting a valuable education in how the back office really worked, the reason he made the move to Morgan Stanley was because he wanted to be a trader, so he lobbied to become a trader’s “runner” — essentially a trader apprentice. A trader agreed to take him on, but Leeson’s manager blocked it, arguing Leeson was too valuable in settlements.

So in 1989, he left and joined Barings Bank.

Barings was very different to Morgan Stanley — it was a looser-run organisation, so Leeson rightly believed that there was more opportunity to move from his hired position to becoming a trader.

Barings was founded in 1762, but by 1989 it was struggling with its identity — because the bank had expanded into securities trading and increasingly derivatives after the Big Bang. To do this, it created Barings Securities Ltd, its modern, revenue-driven arm designed to compete with American investment banks.

At the same time, Barings was aggressively pushing into Asia. Markets like Japan, Singapore, and Hong Kong were growing quickly, and Asia soon became the most profitable part of the business.

This created a sharp divide inside the bank. On one side was Barings Brothers & Co, the traditional merchant bank, run by elite, privately educated guys from Eton and Oxford — cautious, conservative.

On the other was Barings Securities, staffed by aggressive traders from more working-class backgrounds — the barrow boys I mentioned earlier — earning large bonuses and operating in faster, higher-risk markets.

The old leadership remained in charge, but they lacked the technical expertise to properly oversee derivatives trading.

And so its Asian business was given a lot of freedom — very much a hands-off approach. That lack of oversight created the blind spot that really is at the root of this story.

Again, Leeson started in the settlements department, but he was determined to move up.

Almost immediately, he made himself useful. Barings was growing fast, and the back office was struggling to keep up. Systems that had worked for a quiet merchant bank were now under pressure from the surge in derivatives trading.

Leeson quickly became the person who fixed problems. He cleared backlogs, chased counterparties, and pushed trades through when things stalled. He could be forceful, even abrasive, but results followed.

He was making a good impression. Managers focused on what he delivered and overlooked what he lacked — formal qualifications and deep technical training.

What they missed was the difference between being good at process and understanding risk. Leeson knew the mechanics inside out — how trades were booked, reconciled, and corrected. He understood the plumbing of trading better than many traders did, and he was comfortable dealing with senior managers.

His big break came in 1990, when he was sent to Jakarta.

Barings’ Indonesian operation was in serious trouble. At the time, many securities trades still relied on physical paperwork — share certificates and bearer bonds that had to be delivered and exchanged by hand. When trading volumes surged, the back office simply couldn’t keep up.

As a result, Barings was sitting on around £100 million worth of unsettled trades. This wasn’t any kind of fraud — it was simply an administrative overload. But the risk was real. If paperwork went missing or counterparties disputed trades, the bank could be left with large losses.

Leeson spent 10 months in Jakarta, working his butt off, and he did a fantastic job clearing the backlog. The bank avoided major losses.

So he returns to London with his reputation enhanced, and at the same time Barings is looking to expand aggressively in Singapore.

The Singapore International Monetary Exchange — SIMEX — was booming. Barings wanted a bigger presence there, and it needed someone on the ground who understands both trading, but also how the whole backroom operation works.

Leeson has put himself in exactly the right position — the hard work has paid off.

So in February 1992, Leeson applied for a UK trading licence. And this is where the first serious red flag appears. The Securities and Futures Authority rejects the application because he fails to disclose an outstanding County Court Judgment — linked to a few thousand pounds in unpaid personal debts. It wasn’t a huge sum, but it showed two things: Leeson was living beyond his means, and he was willing to hide it. On paper, that should have stopped him in his tracks.

But it doesn’t.

Because Barings then applies for a Singapore trading licence on his behalf, and the bank doesn’t disclose that the UK application was rejected.

This is crucial because now we’re seeing not just Leeson cutting corners — the bank was willing to do the same to keep its expansion plans moving.

In April 1992, Leeson goes to Singapore. He’s just 25 years old. I should mention at this stage that he’s just got married to Lisa Sims, who he had met while in Jakarta in 1990. He’s made General Manager of Barings Futures Singapore — in charge of both trading and settlements.

And that combination should never have been allowed, because in effect, Leeson can make trades and then tell his own team how to record them. There’s no independent check.

In well-run banks, there’s a strict separation of duties.

Officially, Leeson’s trading job in Singapore is something called arbitrage.

In plain terms, that just means taking advantage of small price differences.

The Nikkei futures contract trades on two exchanges — one in Osaka, and one in Singapore. It’s the same contract, just in two places. Most of the time, the prices are identical. But every now and then, one market lags the other by a few points.

When that happens, the trade is simple.

If the price is slightly cheaper in Singapore, you buy it there and immediately sell it in Osaka. You just pick up the small gap between the two prices.

That’s why arbitrage is meant to be low-risk. It’s dull. Almost boring. In a well-run setup, it’s close to mechanical.

So where does it all go wrong?

Very early.

Within Leeson’s first few months in Singapore.

In July 1992 — just three months into the job — Leeson opens something called Account 88888. He chooses the number because eight is considered lucky in Chinese culture.

And it’s what’s called an error account, which are very normal in banks. When a trade is entered incorrectly — wrong price, wrong size — it’s temporarily parked in an error account while the mistake is fixed. These accounts are meant to be short-lived. By the end of the day, the balance should be back to zero.

Two weeks later, the account gets its first real entry.

A junior member of the team makes a straightforward mistake. She sells 20 futures contracts when she should have bought them. The result is a £20,000 loss.

For a bank the size of Barings, that’s nothing.

But for Leeson — newly appointed as General Manager, trying to look competent and in control — admitting a mistake feels like failure. So instead of reporting it, he moves the loss into Account 88888. He asks IT to exclude that account from the daily risk reports sent back to London, so Account 88888 only exists on the local Singapore books — the books Leeson controls. London can’t see it.

So all Leeson is looking to do now is trade his way out of the £20,000 loss, and move on. No grand scheme. Just a quick fix.

But to do that, he can’t stick to dull, low-risk arbitrage.

Arbitrage is designed to make small, steady profits over time. It works through volume and repetition — not quick wins. And it won’t erase a £20,000 loss overnight.

So he changes approach.

Instead of buying in one market and selling in the other, he starts taking a one-sided position. He only buys.

That’s the moment the risk changes — and as we mentioned, Leeson doesn’t really have a great grasp of this type of risk.

When the market rises, he makes money. And for a while, in the early 1990s, that does happen. Encouraged by that, he increases the size of his positions. Each win convinces him the next one will work too.

But markets don’t move in straight lines.

Whenever the Nikkei falls — or even just moves the wrong way for a few days — Leeson starts losing money. And because his positions are already large, even small moves create big losses.

He hides these losses using a process called cross-trading.

Here’s a simple way to picture it.

Say the market price is 100. Leeson transfers a losing position from Account 88888 to an official Barings account at a price of 90. That official account then sells it to the market at 100 and records a profit of 10.

On paper, everything looks great.

The Singapore desk shows a profit. The official accounts look healthy.

From London’s point of view, Leeson appears to be making consistent money. One senior executive even calls him a “turbo arbitrageur.”

But the losses haven’t gone away. And instead of stopping, he takes even bigger risks.

That’s how a small attempt to fix a £20,000 problem turns into something much larger.

As those positions grow, Leeson runs into a new problem.

Cash.

Even if you don’t close a trade, the exchange still demands money every day to prove you can cover potential losses. As Leeson’s bets get bigger — and start going the wrong way — those daily cash demands rise fast.

At this point, closing the trades isn’t an option. Closing them would force the losses into the open. As long as the positions stay open, the damage can be delayed and hidden. So Leeson needs cash just to keep everything alive.

That’s when he finds a way to bring money in immediately.

He does it by selling protection to other traders — effectively offering insurance against big market moves. Those traders pay him upfront for that protection, in cash.

That money doesn’t go into his pocket. It’s used to plug daily holes — to meet margin calls, keep the trades open, and stop the whole structure from collapsing.

These insurance-style contracts only last for a fixed period — weeks or a few months. If the market stays calm until they expire, the contracts simply end.

But the important point is this: the cash only buys time. It doesn’t solve the problem.

And of course, all of this only works if the market behaves.

If it moves sharply in either direction, the payouts he owes can explode.

By late 1994, all of this has become routine. Cash flows in every day. Losses stay hidden. The operation looks profitable from the outside.

Without realising it, Barings has become the single biggest seller of these short-term insurance contracts on the Japanese stock market. It’s a time bomb.

And for context, if we take a look at Leeson’s losses:

By the end of 1992, they’re around £4 million.
By December 1993, £23 million.
And by December 1994, they’ve blown out to £208 million.

And yet, throughout all of this, Barings believes the exact opposite is happening.

On paper, Leeson looks like a star. In 1992, he reports £10 million in profit — nearly ten percent of the bank’s total group profit — and pockets a £130,000 bonus.

Over the next two years, he reports ever larger profits running into the tens of millions, presenting himself as a consistent, high-performing trader and cementing his reputation inside the bank.

At this stage, the pressure must have been unbearable. Every day is firefighting. Every night, more numbers to juggle.

And the market has no sympathy.

You can’t assume calm forever. Eventually, something breaks that assumption.

And that happened on January 17th, 1995. A massive earthquake hits Kobe, Japan, killing more than 6,000 people — a devastating human tragedy.

And for Leeson, it’s the moment everything finally comes apart as the Japanese stock market falls dramatically.

He’s hit from both sides. The trades he’s already holding start losing huge amounts immediately, and the insurance policies he’d sold to raise quick cash now kick in — meaning he has to start paying out on them as well.

Faced with this catastrophe, Leeson doesn’t stop.

He doubles down.

He convinces himself that Japan will recover quickly — that reconstruction spending will kick-start the economy, that the Nikkei will rebound, and that he can still trade his way out.

So he buys even more.

By February 1995, Leeson is long more than 60,000 Nikkei futures contracts. That’s over $7 billion in market exposure — controlled by a single trader.

At the same time, he makes another bet, this time on interest rates. He sells Japanese government bond futures, expecting rates to rise. Instead, rates fall as the government steps in to stimulate the economy. That trade goes wrong as well.

Every market move triggers fresh losses. Every loss triggers margin calls. And every margin call means an urgent demand for cash, often due the same day.

To London, he gives simple explanations. The funds are for advance margin. Or client trades in transit. Or temporary settlement timing issues.

And London sends the money.

In January and February 1995 alone, roughly $1 billion is transferred to Singapore to keep the operation alive.

But the room to manoeuvre is shrinking fast. The losses are growing faster than money can be moved, explained, or disguised.

Thursday, February 23rd, 1995. The market keeps falling.

Leeson realises it’s over — the accounts can’t be juggled anymore. He leaves a handwritten note on his desk with just two words: “I’m sorry”, and goes home to his wife and tells her he’s made a “big mistake.”

That evening, they flee their Singapore apartment. They fly to Borneo. Check into the Shangri-La Hotel. Effectively, Leeson is gone into hiding.

The next day, Friday, February 24th, staff in the Singapore office realise that Leeson hasn’t come into work. They find the note he’s left behind.

At this point, alarms start ringing and the settlement team begins digging properly into the accounts. For the first time, Account 88888 is fully examined and reported to London.

It shows a deficit of £827 million, about $1.3 billion — more than enough to wipe out the bank’s capital twice over. I can only imagine the shock this must have caused to Barings’ management.

The Bank of England attempts a weekend rescue. They gather major British bank heads to form a “lifeboat” fund. But the rescue collapses. No one can quantify final potential loss — most of Leeson’s positions are still open, the risk is uncapped. So on Sunday, February 26, 1995, Barings PLC is placed into administration.

I mean, this is remarkable — the whole thing falls apart within four days: from Thursday evening through to Sunday.

Within days, Barings was sold to ING, the Dutch banking group, for £1.

Meanwhile in Borneo, Leeson wakes to find the Asian Wall Street Journal slipped under his door. The headline: “British Bank Collapses.”

A global manhunt begins. Interpol circulates his description, Singapore issues arrest warrants, and with his face plastered everywhere, they can’t stay. I remember this — it was the biggest story worldwide at the time. They get on a flight back to London, knowing they’re better off dealing with this in the UK than in Singapore.

But the flight isn’t direct — stopovers in Bangkok, Dubai, then Frankfurt.

On March 2nd, the plane lands in Frankfurt. German police board it and arrest Leeson on the spot. Within hours, the photographs are on the front pages of newspapers around the world, and his arrest leads every major news bulletin. His wife, Lisa, is detained but not charged — she had no role in the fraud.

He’s detained in a Frankfurt jail for nine months while lawyers negotiate extradition to the UK. But British investigators conclude the core crimes — forgery, cheating the exchange — occurred within Singapore’s jurisdiction, and as a result German courts approve extradition to Singapore.

The trial moves quickly.

His defence is consistent throughout. He argues that management failures made the fraud possible. That warnings were ignored. That controls were weak. And that he didn’t steal money for personal gain — there was no secret fortune, no offshore accounts. He says he was trying to cover mounting losses and buy time, not enrich himself.

In the end, he pleads guilty to two charges — deceiving auditors and misrepresenting contracts.

He’s sentenced to 6.5 years.

Leeson serves his sentence in a maximum-security prison. A six-by-nine-foot cell. For the first two years, he’s locked up 23 hours a day — and in a gang-run prison, he’s an oddity. A foreigner, known for the scale of his crime, seen by some as a kind of mastermind — which, strangely, earns him a level of respect and leaves him largely untouched. It’s no surprise that his marriage falls apart during his time in jail.

While still in prison, in 1996, he publishes Rogue Trader: How I Brought Down Barings Bank. He receives an advance of around £450,000, and the book is later adapted into a film starring Ewan McGregor. But he isn’t allowed to profit from it — it was confiscated under court orders and used to help satisfy claims arising from the collapse of Barings.

In August 1998, he’s diagnosed with colon cancer, and after serving two-thirds of his sentence, he’s released early, returning to the UK in July 1999. Later, he remarries, settles in County Galway in Ireland, and builds a new life. Since his release, he’s had a varied career and now works in financial risk consulting. He speaks at conferences around the world, charging several thousand pounds per appearance, trading openly on the label he can never escape: the original “rogue trader.”

So what do I think of Nick Leeson?

Well look, there’s no denying he did make a series of very bad decisions and continued to lie and hide his losses over the course of two years. And while he didn’t steal money and hide it offshore for himself — he did take large bonuses based on lies.

He wasn’t wrong at trial to point out that Barings have to take a lot of the blame. Senior executives missed basic red flags, accepted profits they didn’t understand, allowed glaring conflicts of interest to persist, omitted Leeson’s County Court judgment when applying for his trading licence, and they put him into a trading position without the proper training or qualification. Several Barings executives were later banned from serving as company directors. External auditors also missed obvious warning signs.

That said, I’ve watched interviews with Leeson and he has never tried to dodge responsibility.

He’s very clear about his own role. He acknowledges that while the systems at Barings were deeply flawed, he wasn’t a scapegoat. He knew what he was doing, he knew it was wrong, and he did it anyway.

He doesn’t blame pressure. He doesn’t blame targets. He frames it as a simple question of right and wrong — and says plainly that he crossed the line.

He talks about the embarrassment he still carries, and how his reputation will always be tarnished — and that bothers him, but he knows there’s nothing he can do to change it.

I don’t for a minute believe that he’s a bad guy; he just made some very bad decisions. He got into a very small hole — a £20,000 mistake made by a colleague — and instead of just holding up his hands, he kept digging, and it just spiralled out of control.

It makes for a fascinating story. And that brings us to listeners’ emails, and this one is from Dominic, who would love to hear an episode on Richard Branson — and Dominic, you’re going to get more than one. I love Branson’s story and will be doing either two or three episodes on him — but there is an old episode when I used to co-host with Keith. It was our second episode ever on the British Airways Dirty Tricks campaign, where Branson is the main star of that story. So thanks for the suggestion and for listening.

And remember, if you have any comments, any corrections, or any story that you’d like us to cover, email us at info@gbspod.com.

All the best folks