Individual Assignment

Question 5(a)

(1997) Barings Bank – Nick Leeson

While running the back office for Barings Singapore and working as a trader in the front office, Leeson was earning huge profits for Barings off of unauthorized, speculative trades. Leeson cover his losses of $32,000 in a secret account while continue risky bets to try recoup the losses without his superiors’ knowledge. After three years in 1995, Leeson had accumulated losses of $1.3 billion on Asian futures markets, wiping out the bank’s cash reserves. Barings Bank collapsed and was subsequently sold to Dutch Bank ING for one pound. Leeson was sentenced four and a half years in Singapore prison.

(2008) Société Générale (SocGen) – Jérôme Kerviel

In 2005, Kerviel joined the bank’s delta one trading desk. With his experience from prior employment in the middle-office, he could cover fictitious trades with fake counterparties to neutralize overall risk exposure. He also helped SocGen earned a profit of $2.2 billion.

After three years to 2008, without SocGen's knowledge, Kerviel had built up an unhedged bet of $60 billion on index futures. The position was exposed and generated losses of $8.9 billion that almost cause the collapse of SocGen.

Kerviel insisted that his managers was aware of his unauthorised trading but did not stop him since he was making huge profit. He was imprisoned three years for breach of trust, forgery and unauthorized use of computer systems. He had to repay the bank’s $6.7 billion losses while SocGen was fined $4 million for control failures.

(2011) UBS – Kweku Adoboli

Adoboli joined UBS in 2006 as a delta one trader and was familiar with the bank’s controls systems due to prior experience in the back-office. He covered his losses made from unauthorized transactions through falsified accounting records. He accumulated unhedged positions that exceeded his authorization limits of $100 million intra-day and $50 million overnight.

Adoboli revealed his unauthorised positions in 2011...