Nick Leeson and Barings Bank Collapse: My experience

Nick Leeson brought down Barings Bank in 1995 after racking up huge losses through unauthorized derivative trading in Singapore.

nick leeson barings

The immediate aftermath of the Barings Debacle raised the question of why a relatively small merchant bank had a trading operation in a far-flung place so far away from its London head office.

It is a fascinating story that had a huge impact.

The Consequences Barings Collapse Had On Bank Trading Floors

Concerned, other banks began looking at their trading operations all around the world. Why have twenty trading rooms, thus increasing the risk of a rogue trader or a financial loss when you could do the same with three trading rooms, one in each of the time zones and make the other centers into sales rather than trading operations.

The repercussions for many banks were swift. At the time, I was working for a large European Bank, trading the DEM and CAD deposit books through FX Swaps, FRA’s and cash. The bank had trading rooms all over the place, including San Francisco, Wellington, and even Bahrain. Our trading room was in one of the bank’s offshore operations.

Within months, we were told to square all our open positions and explained all our lending limits would be transferred to the head office as the bank sought to streamline its trading operations. Our trading room was scaled down, and the traders, including me, were given their P45s.

The Barings collapse was an instrumental factor in forcing banks to move towards operating a single global trading book that is passed around the world as the trading day moves through the major time zones of Tokyo, London, and New York.

Lessons Were Not Learned As History Repeats Itself

Following the Barings collapse and the impact it had on how banks trade, it was not until the 2008 financial crisis that banks would again come under pressure. Like Barings, respected names like Lehman Brothers would collapse. Banks had not learned their lesson.

In Forex Trading You Need To Make Money Fast

Foreign Exchange is the world’s fastest-moving financial instrument. It is more volatile than equities, bonds, or commodities.

trader on a forex floor

The underlying Foreign Exchange spot market moves first when any news or economic data comes out. It has a knock-on effect as the derivatives market (derived from the underlying spot) starts to react to the underlying spot rate.

If you are a market participant in Foreign Exchange, whether your a Spot Trader, a Derivatives Trader, or a Sales Person, the brutal volatility of Forex burns your metabolism, it is punishing working from seven until five (the London Trading Day) every day.
Forex a short window of opportunity.

Forex Burns Your Metabolism Fast!

Due to the enormous pressure, a career in Forex is a short one, and you only have a short window of opportunity to make your money. It is not often you see forty-five or fifty-year-old Forex Traders still active on the trading floors of large Investment Banks. They may have moved off the floor into higher managerial positions or moved into slower-paced areas within Banking. It is also highly likely having made their fortune they are doing something else.

Forex: Get Ready For A Roller Coaster Ride

If you want to make money quickly, a career in Forex may be for you, but be prepared to take the rough with the smooth and be in for a roller coaster ride. Be ready to work hard, and if financial rewards do not come your way quickly, do not hang around, move into an area where you can enjoy a longer career.