THIS is a "howdunnit". We know who did it - Nick Leeson - and we know why - to make money. But it is how he did it and got away with it for so long that is the most fascinating thing.
Nick Leeson, a settlements clerk for Barings futures' operation in Singapore, singlehandedly destroyed the City of London's most prestigious hank, lessened the authority of the Bank of England and briefly looked like he would trigger a global crash.
Barings was founded in the 1760s by Francis Baring. By 1817 it had grown in power for the Due de Richelieu to reputedly say: "There are six great powers in Europe, England, France, Prussia, Austria, Russia and Baring Brothers."
Its position bred an arrogance amongst its staff which would last until its death throes. But this arrogance at one time was justified. Such was its status that the Bank of England felt obliged to bail it out in 1890 because not to do so would fatally wound the City's international standing.
About 100 years later the Bank of England would find itself asking the same tough question. This time Barings would be left to sink.
Nick Leeson was sent to Singapore in 1992 to work in the back office of Barings Futures (Singapore) (BFS). The back office is where the paperwork generated by the traders in the market is sorted and money accounted for.
BFS dealt in futures in the Far Eastern markets of Singapore, Osaka and Tokyo. But Nick Leeson wanted to make money. He wanted join the big boys and trade. And Singapore would provide that opportunity and his own bank the wherewithal.
To understand how he could work in the back office and on the trading floor means understanding Barings. Peter Birch, a senior executive with Abbey National described it thus: "It was a jungle, you succeeded by being ruthless."
Barings brought the vicious art of office politics to a new high. The in Fighting between the old guard merchant bankers and the new money futures traders was legendary public school boys versus Essex lads.
In allowing Nick Leeson, a back office clerk, to trade Barings broke a fundamental rule Lee son was both trader and checker and the possibility for abuse was endless. Those who had an inkling turned a blind eye to what was going on but most of Barings managers did not have a clue. In fact, the ineptitude of Barings management is hammered home at every opportunity by Mr Fay.
Leeson traded with the bank's money and hid his losses in an account known as 88888. Because he ran the back office there was nobody to question his actions.
By the end of 1994 he had lost £200 million. In a further two months his losses would spiral out of control, as Canute like he tried singlehandedly to change the flow of the market. He threw money around like a sailor in port until his losses had hit £830 million and then he cut and ran.
When the collapse came it stunned the City and the Bank of England. It also did nothing for the reputation of senior management in Barings whose arrogance remained unpunctured until it dawned on them that its fellow banks and the Bank of England was not going to row in and bail them out.
Dutch bank ING bought it for £1 plus debts and Barings ceased to exist in all but name, leaving its bones to be picked over by the likes of Mr Fay to provide us with an absorbing and literate morality tale for the 1990s.
