Nick Leeson urges banks adopt IT risk management

Rogue trader Nick Leeson has called for IT risk management processes to flag trading anomalies in banks.

Rogue trader Nick Leeson has called for IT risk management processes to flag trading anomalies in banks.

Nick Leeson caused the collapse of Barings bank in 1995. Speaking today at the Burton Group Catalyst conference in Prague, he said: "I was losing £20m for every point the Nikkei lost, resulting in £11m per day for the first 58 days of trading in 1995. There should have been an interface between IT and business to highlight anomalies."

Trading data was sent from Leeson's office in Singapore to Barings' London headquarters. But the IT professional receiving this data did not understand what it was and deleted it. "I manipulated all the data. It's important to have a co-ordinated approach. There was no control, human or technology-based to highlight the discrepancies."

Leeson added: "It's frightening that, 13 years on, the same errors are occuring. The last 12-18 months has shown risk management is an oxymoron - definitely risk, but no management. People are paying lip service to risk management."

He said that since the failure of Barings, there have been a number of wake-up calls. Speaking on the current banking crisis, he said: "This is the wake-up call that no will ignore."

The failings at Barings bear similarities to the recent losses at Société Générale and City Pacific, said Leeson. "There were classic errors. I was responsible for back office. At SocGen, Jérôme [Jérôme Kerviel, who racked up £3.7bn losses for Société Générale] moved from designing risk management to moving to the trading floor. It happens because of a lack of understanding from the top of the organisation down. During my time at Barings, no-one was able to challenge me because they were not in a position of authority to challenge from a position of strength."

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