Episode Details

In 1992, Nick Leeson was the most profitable trader at Barings Bank. In 1995, he was the reason Barings Bank no longer existed. The same person. The same desk. The same Singapore office. Three years apart.

What changed was not Leeson. What changed was the size of the position hidden in account 88888 — an internal error account he had the authority to use because Barings had given him an unusual mandate: run both the front office trading desk and the back office settlement operations. The person executing the trades and the person reconciling the trades were the same person.

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That single structural decision, made for cost efficiency reasons and documented in internal memos, was the condition that made everything that followed possible. By February 1995, account 88888 held losses of $1.4 billion. Barings' total capital was $900 million. The bank was sold to ING for one pound.

This episode dissects the mechanism layer by layer: the origin of the account in a 1992 junior trader error, the Kobe earthquake and the collapse of the short volatility position, the three signals that were in the internal record and never combined into a single finding, and what Peter Baring told the Bank of England after the collapse.

Every collapse has a pattern. We dissect it. Layer by layer.