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[Extract from the conclusion of the Bank Of England Report on the Collapse of Barings]


The unauthorised and concealed trading


Leeson had no authority to maintain open positions overnight. He was
given certain specific limits on intra-day trading. He had no
authority to trade in options (save as execution broker on behalf
of clients). In all these respects Leeson persistently acted beyond
his authority.


Account '88888' was opened in July 1992, shortly after Leeson was
posted to Singapore. Thereafter Leeson  engaged, latterly on a
rapidly increasing scale, in unauthorised trading in futures and
options through this account. By 31 December 1994 he had
accumulated losses on this account of some 208 million.
Throughout he represented that he was in fact making profits.
Indeed, he was perceived within Barings to be a 'star performer'.
Barings understood that the profits from the trading activities
within BFS were principally made from inter-exchange arbitrage
activities involving 'switching' between SIMEX and Japanese exchanges
with (as they believed) fully matched trades at no real risk to
Barings. In the event, by 27 February 1995 the accumulated losses on
account '88888' amounted to some 830 million.


This unauthorised trading was funded:

(a) by the use of money advanced to BFS by BSJ and BSLL for what BSJ
    and BSLL understood to be their own account trading through BFS;

(b) by the use of money advanced by BSL to BFS on BFS's requests for
    the payment of margin to the exchanges; requests which were met
    without any effective query and without any adequate steps
    being taken by Barings in London to verify them or to reconcile
    the advances to the trading records of clients;

(c) in January and February 1995 - when the funding problems of BFS
    were becoming acute - by the use of artificial trades created
    with a view to reducing the level of margin calls from SIMEX.


The unauthorised trading was concealed by a number of devices.
These included the suppression of account '88888' from Barings in
London (which account was mentioned only in the margin files and
did not attract the attention of Barings in London); the
submission of falsified reports to London; the misrepresentation of
the profitability of BFS's trading; and a number of false trading
transactions and accounting entries. 


The unauthorised trading activities within BFS, which intensified in
January and February 1995, built up such massive losses that (when
discovered on the 23 February 1995) they led to the failure of

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