Banking Essay Example | Topics and Well Written Essays - 2500 words

Banking - Essay Example ing overtaken by Dutch giant ING for a measly sum of  £1, and exposing the risky environment in which equity corporations scale catastrophic limits in order to make a quick profit. At the heart of the devastating scam was a person with a huge appetite for risk-taking but hardly any accountability towards the bank, Nick Leeson. Overnight, the unscrupulous futures’ trader from London who was previously the poster boy for Barings’ high-growth earnings from Singapore’s premium monetary exchange, SIMEX (In 1993, he documented nearly 10% of the bank’s profits in futures’ trading), took special advantage of the bank’s vulnerability in not being able to hedge the risks that come with dealing in a concern as sensitive as this. This is what happened. Nick Leeson’s job as Chief Trader at SIMEX was to buy and sell the simplest kind of derivatives pegged to the Nikkei-225 stock exchange of Japan. This job entails the methodology of a skilled bookie who basically, bets on what people are likely to bet on in the future course. Despite booking profits on various occasions, some of Leeson’s predictions proved incorrect. The idea to fool the bank management in covering up details of unsuccessful tradings came from devising an unaudited bank account, called error account 88888, to fix  £20,000 goofed up by an inexperienced team member, which was later to serve as Leeson’s personal getaway in covering up failed investment strategies. Even as the entire audit team of Barings’ was kept in dark about what was the tip of the iceberg then, Leeson managed to document account losses which were initially at  £2 million in 1992 to an astronomical figure of  £208 million by 1994. The final blow