Total Risk: Nick Leeson and the Fall of Barings Bank, Judith H. Rawnsley

Harper, 1995 (1996 reprint), 256 pages, C$7.99 mmpb, ISBN 0-06-109535-4

In many ways, it seems like a tale too implausible to be true: How a young 28-year-old trader managed, through a series of increasingly risky trades, to wipe out the assets of a major British bank and drive it to bankruptcy. You probably heard about it a while ago; the story made plenty of headlines in early 1995. In 1999, the docu-fictive film, ROGUE TRADER (starring Ewan McGregor) even brought the story to European silver screens. (The film was a straight-to-video release in North America, perhaps indicative of its low-budget, mildly-imaginative execution.)

Though ROGUE TRADER was based on a book, it used Nick Leeson’s autobiography as a starting point, not Judith H. Rawnsley’s rather more objective account. Total Risk is a more straightforward retelling of the story by someone who’s familiar with the context: Interestingly enough, reporter Rawnsley found herself fascinated by the fall of Barings Bank because she herself had worked there years before the scandal, even meeting Leeson on a few occasions. In the early parts of the book, she makes full use of her personal experience by describing the environment in which Nick Leeson operated and how it may have fostered the sense of invulnerability that lead to the financial collapse of the bank.

Structurally, Total Risk begins with an explanation of the author’s relationship with Barings Bank, a short description of the collapse of the institution and only then begins to explain what led to this crisis. It’s a good decision, but a risky one; as it stands, Total Risk is never as good as when it describes both the fall of Barings and the background elements that allowed such ambition to take hold in Nick Leeson. (Latter parts of the book delve into financial minutiae and are not quite as fascinating as the first half.) One of the strengths of the book are the numerous quotes and opinions presumably obtained by Rawnsley herself, allowing us to peek under the curtain of what happened during that time.

As Rawnsley explains, Barings Brothers lasted some two hundred years as one of Britain’s most renowned banks before deregulation was introduced in 1986 in an effort to improve the efficiency of British financial institutions. As a result, Barings started looking for more exciting ways to make money, spinning off a unit called Barings Securities, which in looking around for profitable markets, settled for Far East bureaus. Total Risk hits its stride in describing the alpha-male social environment in which the expatriate young traders evolved, and how this led to some curiously excessive behaviour. Still, initial successes were so impressive that the Singapore branch was allowed greater and greater independence, a lot of it concentrated in the person of one hot-shot trader —Nick Leeson.

When Leeson’s luck ran out (as it usually does in every gambling environment, high finance being no exception), he started making illicit loans to cover his losses. When his further investments also started panning out, he borrowed some more. Rawnsley is quite effective in describing the all-or-nothing frenzy which may have gripped Leeson at this junction, racing with himself in order to obtain the one break -only one lucky break- which would pay off everything.

But it didn’t, and soon enough no one could hide the magnitude of the disaster. Leeson escaped, was caught, manipulated public opinion (the description of this PR campaign is another of Total Risk‘s best moments) and went to jail. Most of Barings was bought by ING and controls were tightened to ensure that nothing like this will ever happen again.

Well, at least until the next new financial scam. As the spectacular collapses of Enron and Worldcom, indicates, there may be an infinite market for financial-swindle non-fiction. What sets Total Risk apart from such other works as Diane Francis’s markedly inferior Bre-X is a viewpoint halfway between an insider and a reporter, a sense of closure and an interesting writing style that often has more similarities to fiction than to financial analysis. While it would be unfair to say that this book has wide appeal, it’s more fitting to suggest that readers with a built-in interest in such stories will find a lot to like about this particular account.

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