The Disappearing Bezzle

By Fildes, Christopher | The Spectator, February 2, 2008 | Go to article overview

The Disappearing Bezzle


Fildes, Christopher, The Spectator


My friend Herbie from the Last National Bank of Boot Hill understood about rogue traders.

When another hapless bank owned up to losses 'due to unauthorised trading', he added: 'They mean nobody authorised the guy to get it wrong.' Now that a French trader called Jerome Kerviel has set a new record by losing £3.6 billion, Société Générale, whose money it was, is left to wonder how it happened and to search for some deep, dark conspiracy.

It looks more like a familiar story with extra noughts on the end. A swashbuckling trader buckles when he should have swashed, and then tries to double up and cover up. The money all goes to the people on the other end of his deals.

This happened to Lloyds in Lugano and to Allied Irish Bank in Baltimore, and to a Japanese bank whose man in New York would never take a holiday and kept the books to himself. Most memorably, it happened to Barings, when a swashbuckling trader called Leeson, out in Singapore, doubled up and broke the bank.

For him and for Barings, the moment of truth came at 1 a. m. when Leeson had vanished and the accountant from London forced the lock on the drawer of his desk, to find the telltale records and the scissors and paste he had used to fudge the documents he needed. This was an extreme case of what old hands call TIDS -- Tickets In Drawer Syndrome. No wonder they say that the desks in a dealing-room must not have drawers.

These old hands learned to rely on their noses and ears. They would listen in to the market, they would talk to their opposite numbers in other banks, they would pick up a pattern of dealing and ask themselves if it made sense. Whether anyone at SocGen asked questions like these about Kerviel's dealings, we shall now have the chance to find out.

None were asked at Barings. All the way up to Peter Baring, the chairman, everybody wanted to believe in this star dealer. They had told the Bank of England that his dealings were essentially risk-free and very profitable -- as if there were no contradiction in terms or no link between profit and risk. Their bonuses, all of them bigger than Leeson's, were riding on him.

The only man not on a bonus was the lowly accountant who rumbled the fraud.

That, too, is a familiar story. Bankers win their promotions by winning new business, taking on new risks for new rewards and showing what stick-in-the-muds their competitors are. (Example: Adam Applegarth at Northern Rock. …

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