Nick Leeson on banking: extremely competitive … and improperly policed
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Version 0 of 1. Last Thursday, 19 years and 361 days after he briefly became one of the most famous people in the world, Nick Leeson sat his 10-year-old son down and told him about that time he singlehandedly lost £862m and bust one of the oldest merchant banks in the world. Leeson has two older teenage stepchildren with his second wife Leona, who by now have picked up “bits and pieces, sometimes people say stuff”, but with a likely renewal of interest in his story, it was finally time, he felt, to tell Mackensey about it. What did he say? “Just told him the truth. There’s no other way you can be. Throughout that period there was a litany of lies and telling people different stories, not remembering what you’d told this person and that person, and the two never being exactly the same. So over the years, communicating better has been a key lesson for me. “So the key messages [to his son] were: I didn’t ask for help. You should always ask for help and you can always ask me anything. And no problem in your life is insurmountable, because I’ve done most of them and I’m still here.” The world of banking is always good to me, because it throws out a bone from time to time by shooting itself in the foot Mackensey just took it in his stride, he says “You know, ‘can I get back on your phone and play Fifa’ or whatever?” Monday marks exactly two decades since Leeson and his then wife Lisa fled Singapore, after he finally admitted to her that he had “lost a lot of money” in disastrous and illegal trades on the country’s stock exchange and had, somehow, concealed the losses from his bosses at Barings. His flight sparked an international manhunt for the missing trader, and a frenzied scramble to recapitalise the bank, which had inexplicably failed to spot that the sensational profits reported by the whizz-kid leading its Singapore operation were in fact masking losses of tens and then hundreds of millions of pounds. Three days later, Barings collapsed. The venerable institution that financed the purchase of the state of Louisiana from France and in which the Queen was rumoured to have £40m invested was no more, reduced to rubble by the actions of a 27-year-old plasterer’s son from Watford. At a time when bankers were largely believed to be competent, and bank collapses seen as unthinkable, it caused a global shockwave that, all agreed, surely meant that nothing similar could ever happen again. Leeson served four and a half years in a Singapore prison for fraud and illegal trading, before being released early after he contracted bowel cancer. His first wife divorced him while he was in jail. Leeson now lives in Galway, Leona’s home town, and the events that made him notorious and inspired a Hollywood movie starring Ewan McGregor are very much a distant memory, he says. He’s heavier now, and shaves his thinning hair to the scalp, but the barrow boy accent has never faded, and when he relaxes there are glimpses of the same ironic smile that he flashed at the world’s press when he was finally arrested in Frankfurt airport a week after his escape. One might have imagined that Leeson would want to leave his crimes well in his past, but it hasn’t quite worked out that way. After a post-prison psychology degree and occasional jobs here and there playing celebrity poker and working for Galway United football club, Leeson now makes the bulk of his income on the after-dinner circuit, talking to bankers about the incompetence and complacency that allowed his fraud to flourish, and about how, in his view, very little has changed. Happily, if you’re an expert in busts, the past few years haven’t been bad for business. “Strangely so,” admits Leeson. “The world of banking is always good to me, because it throws out a bone from time to time by shooting itself in the foot.” Even among the ranks of rogue traders, he points out, “I’m way down there now.” Kweku Adoboli lost UBS £1.5bn in 2011, and three years earlier Jerome Kerviel holed SocGen with losses of £3.7bn. Living in Ireland can be helpful too. In a role that writes its own punchline, Leeson does some work as a debt counsellor, negotiating with creditors on behalf of a handful of clients who have got themselves into catastrophic debt, of which the country has no shortage. His overwhelming emotion, looking back on his fraud, is one of embarrassment. Not shame or contrition? “You go through them all. But the lasting one for me is embarrassment. Because it’s the complete opposite of what I wanted. I’d want to be remembered for my successes rather than my failures, but nothing that I do is probably ever going to change that. “You do go through the remorse. You are ashamed, but you’ve got to move on and you can’t be going round every day with your head bowed not looking people in the eye. I’m not scared to look anybody in the eye. So if anybody wants to criticise me, I like to be a situation where I can defend myself. They are entitled to their opinion. But I want to be able to defend mine.” His defence might be summarised as follows: yes, he deserved to go to prison for his actions, but he’s served his time. Meanwhile, what about the banks? In the four years from 2009, he points out, the global banking industry has paid out £166bn in fines, for a colourful spread of offences ranging from currency market manipulation, money laundering, abusive mortgage practices and rigging Libor rates. “£166bn! I lost £862m. So the fines are far outweighing the losses, and still nothing’s changing. If you can fine JP Morgan for their activities in the mortgage market in America and they still go on and prosper and turn big profits, where is the deterrent, because nothing is changing that approach to the way they do their business.” What’s the common thread between his fraud and all the subsequent scandals? Is it hubris? Greed? “Being an ex-banker, everybody keeps away from the word greed, but that’s what the industry is about. I don’t think you could find a bank that sets themselves a target and, once they get there, is happy with it in terms of their turnover or profit. They always want to exceed that and go further. “It’s also extremely competitive, and in my opinion it just is improperly policed.” The regulating authorities are fatally weakened by the banks poaching their better staff, he says. He begins to offer a suggestion that retiring bankers in their 40s should be enticed into auditing roles, but falters. “They are probably thinking I won’t get out of bed for £80,000 a year.” Politicians, meanwhile, talk tough about new regulation and the banks eat a little humble pie at first, “but over a period it becomes about what the banks want, because in my opinion they are just too important”. Does he miss it? “Look, you miss the buzz. The industry for me is the best. It’s about adrenaline, competition, proving you are better than everybody else.” He also firmly believes, however, that it was the cause of his cancer. “So would I go back to it? No.” The licensing authorities might have something to say about that in any event. Life, by contrast, is quiet now. A typical day sees him picking the children up from school, maybe a couple of meetings, mucking out his son’s pony. “Look, I live comfortably, I don’t try to hide from that. I’m very well paid for the talks that I do.” When pressed, however, he admits that for someone who had “a huge need for success”, it’s not quite fulfilling, “because I still feel that I have more to offer”. When he was first convicted, Leeson was served with an injunction making him personally liable for £100m, which resulted in his assets being frozen and limited his earnings to a modest monthly allowance while he supposedly began to repay the rest. The payments lapsed after a few years. Clearly, he barely made a dent. Who were the financial losers of the Barings collapse? Leeson says: “Nobody really.” Hang on, that was somebody’s money. Well, he says, the Barings family were probably the biggest losers, and there were bondholders who had put £100m into the bank very late. He thinks all the bondholders were eventually paid out anyway. More than £800m gone, and the way he tells it, it’s a victimless crime. “It’s not victimless because people did lose their jobs.” Not the 2,400 reported at the time, though, that’s “absolute bollocks”. “It’s not much more than 20, 24 jobs.” Is he comfortable, these days, being Nick Leeson? “I don’t have a choice. Yes, I would have preferred to be … I would have been the CEO of Barings by now, in an office in Singapore or Hawaii. But it’s not … I suppose it was an option 20 years ago, but it’s not an option now. So I just don’t go down those routes.” These are, he says, “the cards I have been dealt. Make the best of it that you can.” |