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. Last Updated: 07/27/2016

How Trader Brought Top Bank to Its Knees

TOKYO -- It reads like a whodunit potboiler: Rogue trader brings down a venerable merchant bank with secret high-stakes gambles, sending shock waves through world financial markets.


But the real question is a howdunit: Could one person really cause such widespread financial turmoil? How?


Authorities on Monday pointed the finger at trader Nicholas Leeson, 28, as the figure whose nearly $800 million in failed gambles in Asian securities markets triggered the collapse of Baring Brothers and Co., one of Britain's oldest and most prestigious investment banks.


Financial players around the world were wondering how Barings could have let a young trader put 233 years of tradition in danger with huge and risky bets on Japanese stocks.


The Bank of England said the bulk of the unauthorized trading was in the form of wagers on the direction of the 225-issue Nikkei Stock Average, Japan's benchmark stock index.


It was the wrong time to gamble on Nikkei gains. Between June 13, 1994, and the end of last week the Nikkei average lost 18.9 percent of its value.


"The losses have wiped out the assets of the bank," said Arthur Napolitano, a senior vice president and head trader at Baring Securities in Bangkok.


Some bankers said the problem was less one of a rogue trader than flawed procedures and checks by the company.


Leeson's whereabouts Monday were not known, but reports said he had fled the country. In Kuala Lumpur, Malaysian police said they were searching for Leeson after receiving a request from Singapore to arrest him.