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Join Gabby Logan every week as she speaks to some familiar faces about their relationship with money, the financial lessons they've learned on the road to professional success, and how they're investing for their family's future.
Visit ii.co.uk for more investing ideas and information.
Gabby: Hi, I’m Gabby Logan, and this the ii Family Money Show. In each episode, I speak to a familiar face about the role money has played in their family life and professional success. This time I'm joined by Nick Leeson, the former derivatives trader who bankrupted his employer, Barings Bank, in 1995. Sentenced to prison for his role in the bank's collapse, he later published his account of what happened in a book, Rogue Trader, which was turned into a movie starring Ewan McGregor and Anna Friel.
Since his release, Nick has moved to Ireland now spends his time delivering speeches about financial regulation to audiences around the world. In our interview, he tells me about the huge cultural shift that took place in the financial sector during his time there, why he's never been great at saving for the future, and why he always encourages people to ask for help when they need it.
Nick Leeson, thank you so much for coming on the ii Family Money podcast. Take us back to young Nick, growing up ,and your life and lifestyle, your parents, what they did, and whether or not you had any idea at that age whether or not they struggled with money.
Nick: Well, I grew up on a council estate in Watford, so we were very, very working class I would imagine. My dad was a plaster, my mother did a bit of work in a mental hospital that was fairly close to where we live, just night work really. So there was never a lot of money around. I mean, I think in terms of entertaining myself, it was always playing football, or running outside, things that didn't really cost a great deal of money. It would be difficult to say that we ever went without anything because I don't really remember that. I think my certainly my mother more so than my father, but she would've always made sure that we had what we needed. But I wouldn't have thought it was particularly easy for them to facilitate that most of the time.
I do remember very … Look, we would've had a television that you put 50p’s into the back of, and somebody would've come around at the end of the week to collect the 50p’s. And I’m sure that my mother and father delved into that once or twice when maybe they shouldn't have, and we were hiding from the TV man when he came round at the end of the week.
So, yes, it was a nice enjoyable childhood, but there wasn't a lot of … I can't remember going out to eat in a restaurant until certainly I was working myself and doing things like that, so there was only ever just about enough to get by.
Gabby: Quite typical for a lot of kids, isn't it, growing up like that, where parents probably are keeping a little bit of their financial worries and concerns away from children. But you felt like you had a great happy childhood, so why would you worry about it. But then I guess on the flipside of that, they weren't talking to you about pensions, or educating you about money, or talking to you about savings.
Nick: No, well, I don't think they had any themselves to talk about. So no, there was definitely none of that. And I think when you look at school curriculums I don't think you see that really in any of those till you get to university and people try to explain that a little bit to you at that particular juncture. And a lot of it's learned as you go, so no, I can't imagine that my parents ever had a pension; I don't think they ever had money in the bank, it was always – like to say it was hand to mouth I think is probably a bit of an exaggeration, but it was pretty damned close to that.
Like I would remember maybe on a Saturday going down to the supermarket that was fairly close to where we lived and my mother and father maybe would treat themselves to steak on a Saturday evening, but it wouldn't be – you know, it wasn't sirloin, or it wasn't ribeye or anything like that, it was the cheapest cut, and they would make do with that. I always look back – as much as I look back on my childhood with fond memories, when I look back and try and view it from their perspective, the only thing that I can really see is hardship, to be honest with you.
And yes, you are right, they would try to keep that away from you, but if I needed a new pair of football boots, or I needed something for school, it was – maybe it wasn't the top of the range that I was getting, but I was getting something that was the best that they could offer at that particular time.
Gabby: And how did that inform your ambition in the world? When you were thinking about what you wanted to do in life as a young – not saying like under 10, but when you’re getting to teenage years and you're thinking about when you're going to leave school, and whether you're going to go to further education, how much was that informing what you thought you might want to do, whether or not it was something that was lucrative or well paid?
Nick: Well, I always went to really good schools, so the school that I went to Parmiter’s was a – it used to be based out of the East End of London, it was a grammar school originally, so it was of a very good quality. So I was always surrounded by people that were probably not as working class as me, if that's fair, so more of a middle class type of environment who grew up in different areas to me. So there was always a lot of aspiration, and my mother was – although she wasn't pursuing an academic career, she had more of an academic bent than my father, and so she would always try to motivate us to achieve more than she had. I think that was the overriding ambition from her.
She was born in Aberdeen in Scotland and she moved down to Somerset when she was in her 20s, she had a bit of a nursing background, but it was all about – I think what she tried to do was maybe achieve more through her children than she had actually been able to. I don’t think she was ever quite happy with the lot, or the life, that she was living, and she always wanted a little bit more. But she'd probably come to the conclusion that, with four kids by that stage, that wasn't going to happen, and maybe one of the ways to achieve that was through her children.
Gabby: She had ambition for you?
Nick: Yes, always, and that ambition shone through, certainly prior to the age of 11, by overachieving in junior schools, and always being at the top of the class. I don't think I'd necessarily set myself on any particular career path. I often joke when I'm doing after dinners that my mother would've always wanted me to get involved in a career that involved banking, accountancy, and the law, and unfortunately I touched on them all in one way or another, and definitely not in the way that she would've wanted me to.
But that was, I suppose that working class ambition to have a job for life, a job that's going to pay you for that period of time that – as you mentioned previously that has pensions and is going to give you that security and that leg up, if you like, into more middle class England at the time, I suppose, and that was very working class ambitions.
Gabby: So am I right, you went – the first job you had was at Morgan Stanley? Was that the first big bank?
Nick: No, I left school and I worked for Coutts.
Gabby: Right, so you worked for Coutts first.
Nick: Yes.
Gabby: And this is your first look, your first glimpse inside that whole city life, and because nobody in the family, as you mentioned, worked in the city, you didn't have anybody who you could particularly refer to for –
Nick: Sure.
Gabby: – behavioural norms. Just it’s different; it’s a different environment isn’t it?
Nick: Yes, very much so. And on day one, I would've stepped outside of Bank tube station, and it was a completely different world. And I don't want to over egg this too much, but the amount of times that I would've been to London just on its own would've been very, very limited.
Gabby: Just for people listening to this, Nick, to put it into geographical context, you’re near Watford –
Nick: Yes.
Gabby: – and this is a very short car or train ride into London, isn't it?
Nick: Sure.
Gabby: This is 20, 25 minutes on a train, but a world away.
Nick: Yes, because like firstly you've got to have the money to be able to get there, so like we never had holidays overseas or anything like that. If we were lucky we got to Margate or somewhere like that, maybe on a coach trip for a couple of days or something. I can't really remember staying anywhere overnight. So yes, it was definitely a world apart when I started working the city. And probably to emphasise that a little bit more, at Coutts & Company they were still wearing tails and waistcoats when you were working in the bank as well, so yes, it was a completely different world and everybody who was banking at Coutts at the time were extremely wealthy, as I'm sure is still the case today, so it was a completely different way of life.
Gabby: And what did that do for you, as a young man at the time, in terms of opening your eyes to this new world of wealth and ambition? And was it an immediate thing that you thought, “This where I belong, I want to get more of this and be involved in more of this.”?
Nick: I don't think there was any sense of belonging initially; it was definitely you were from the other side of the street, if you like, to a certain degree. But Coutts was a good organisation to work for; there was a very diverse mix of people. It was quite a sporting environment; I used to play football for Coutts as well down in Catford at the weekends, and they'd do things that I would never have done before. From a social perspective, the guy who managed the Lombard Street branch, which is where I was working right in the heart of the city, he used to sometimes during the week take us to play Crown Green Bowls down somewhere in South London which was – you know, I'd probably never seen the game before at that sort of stage.
But yes, no, like Coutts was a very welcoming, encouraging type of organisation, and I enjoyed my time massively there. But it was also the Big Bang era, so there was a lot of new banks coming to the City of London, there was a lot of opportunity. So if you were hardworking, if you were accurate, if you were diligent then there was the chance to proceed because there was a lot of demand and not a great deal of supply because it was expanding out so quickly. So it fell into my lap, if you like, that it was a period of time that the city needed new people in order to flourish in the way that it expected over the next couple of years.
Gabby: But there was also the whole cultural shift, if you like, wasn't there, in terms of entrepreneurialship, and Thatcherism, and if you want to take it to the other extreme, the Wall Street “greed is good” mentality that if you look back in that period culturally, there was a massive change. And you were in that period as this whole change was happening.
Nick: Yes, from the UK's perspective it went from just the Big Bang era for me, which I think a lot of issues that occurred over the following years, including my own, can be put back to as it went from the world of stockbroking, “my word is my bond” to this massive changing culture where it became other people's money. It was big banks with big balance sheets, and lots of foreign banks coming into the City of London.
And there was a huge culture change over that period that I think has only really settled down a number of years later, and probably some of the culture issues that existed around that time have only really been weeded out in recent years.
Gabby: Was it exciting?
Nick: As an 18 year old, there were bits of it that was exciting. I mean, Coutts is a high street bank, just a very posh high street bank, so you’re clearing cheques, you're bouncing cheques, you're giving out loans, so it’s that sort of more mundane form of banking, if you like. For me, it was a job; I used to enjoy getting home and socialising with my friends, and those were the people that I grew up with, that I was more used to, that I considered normal, where there was a new normal, I suppose, in the city that I was getting used to. I didn't really mix the two. The city, for me, was a job of work and it gave me that ability to succeed which was really important to me.
It gave me the opportunity to prosper, which was equally important, but it was a job of work, and it was about doing that as best as I possibly could. And then if I wanted to party, or if I wanted to have fun, that was back home with people that I knew well, that I trusted, and could enjoy myself with because I'd known them for a long period of time.
Gabby: So at this point, you had quite a healthy relationship with money; it was your salary, your work life was your work life, you were going home. It was very important to you, obviously, to have that stability. And were you earning enough at this point that you were able to do your own private investments, or you were able to put money aside?
Nick: Well, I bought a flat fairly early, so I think I was 19 or 20 when I did that. So this was going back to those days, as you mentioned, the Thatcherism type era where –
Gabby: A hundred percent mortgages.
Nick: Yes. Yes, well, a hundred percent mortgages, but they were at 15 or 16 percent.
Gabby: True.
Nick: So a hundred percent mortgage didn't really matter too much unless you could pay the interest on it anyway. So, no, I bought an apartment fairly early on then; I think I was probably 19 or 20. So like I was earning well; I mean Coutts were a good payer. And I don't think I've ever been a great saver; I'm not a great saver to this day. I've still got some of those – well, a lot of those working class attributes that I would've seen in my mother. I’m not ostentatious, I don't really – I have one watch, I can't work out why anybody would need two. Very simple needs. So I much prefer to give than to have myself, if that makes sense. So I have three children now, and I have a wife, and they're all quite willing to receive as opposed to …
Gabby: Lucky for you.
Nick: Yes, of course. So, but no, yes, look, I do remember – and I can't remember the stock if you're going to ask me the question afterwards – but there was a couple of penny stocks that I would've dabbled in around that sort of time, but certainly not invest in any blue chip long-term stocks. It was just in and out type of transactions in something that was very cheap to invest in.
Gabby: I'm sure you have looked back, and I know you've done a Psychology Degree, haven't you as well, so I'm sure you've looked back and tried to work out how that young man ended up in Singapore, embroiled in one of the biggest – actually in Singapore it’s in the Top 25 crimes of Singapore, so one of the biggest financial scandals in the world.
So how did that happen in such a short period of time that you seem like, there, a very measured together young man who bought his flat and didn't really get his head turned by material things. Tell us about getting to Singapore and the process that saw you get into so much trouble.
Nick: Yes, well I suppose from Coutts, as we've already painted the picture, it was the Big Bang era, there was lots of opportunities, so people were – you know, you don't see it so much these days, but people would change jobs. I saw people changing jobs after six months just because there was an extra five grand on the table to go and work for one of the big American investment banks because they needed people and there was limited supply. So I think that level of opportunity hasn't existed since. This was probably a once in a lifetime situation, and that afforded me a lot of possibility.
I was also very good at my job. I often say I didn't necessarily lick it off the ground, I was very diligent, I was very accurate, I’ve always been a hard worker, and so those things stood to me during that period. So after a couple of years at Coutts, I applied for a job at Morgan Stanley, the big American investment bank, and was hired there. Started work down by Leadenhall Market, looking after bond settlements initially. It was around the time of Drexel Burnham Lambert and some of the junk bond scandals that were going on at that particular time.
Then moved into Futures and Options Settlements again with Morgan Stanley, which was based over in the West End, and was primed for a role on the London Traded Options market trading floor at that time. But there was a bit of a tug of a war between the trading floor staff and the people that I worked for in the Settlements Department back in back in Tottenham Court Road at the time. And I could move, but I couldn't move just then; the opportunity may not be there in another six months or so.
So Barings came onto me at that time, headhunted me to go and head up their Futures and Options Department in Portsoken Street back in the city. And there was good money on offer, and Barings were renowned for paying really, really big bonuses at the time, and I took that opportunity. So I think there was a lot of rewards for a lot of hard work during that particular period, and I was on an upward path. And at Barings, I found the work quite boring, I'm afraid, and so I went to one of the senior – or one of the original Directors of Baring Securities, Ian Martin, and I said to him, “Look, Ian, unless you can find …” And Ian was one of the person that was involved in the recruitment process.
I said, “Unless we can find something else for me to do I'm going to leave and go somewhere else.” So he offered me a role on the Sydney Futures Exchange in Sydney, obviously. But again, it wasn't ready, so he said would I mind going out to Hong Kong and work there for a period of time. They had a big settlements issue that they couldn't solve, and they were going to send a few people from London out to try and do that.
So I moved to Hong Kong, I was in Hong Kong for a month, didn't particularly like it, didn't like the English people, they're very colonial, and I was having a few disagreements with some of the English people that were out there. And I was then moved down to Jakarta in Indonesia and stayed there for about a year on, on or off, and I really enjoyed Jakarta. It was really basic; it was really down to earth, quite dangerous. We had a driver who would carry a gun who would take us from the hotel to work, and we were trying to solve this issue that they had in Indonesia at that time.
Moved back to London for a short period of time, after that worked in business development. One of the roles that I was looking at was opening up a seat on the Singapore International Monetary Exchange. And I then requested to move to Singapore to take over that role which the bank were only too keen for me to do. And then things started to go wrong. Up until that point I'd always enjoyed success, I'd always been on that upward curve, and encountered things that I couldn't cope with, didn't deal with appropriately straight away.
And I suppose the easiest summation of it is that I met my own level of incompetence whilst I was in Singapore and made some really bad decisions, concealed losses in the now infamous Five 8’s account, and that eventually over a three year period led to the collapse of a 233 year old merchant bank.
Gabby: It's some story, as we know, and as anybody who's read your story –
Nick: Yes.
Gabby: – and has seen the film version of your story, and heard you talk before., and I know to distil it down like that – which you've done many, many times, I'm sure, talking to people about – still probably feels a bit surreal when you say it.
Nick: Mm.
Gabby: But when you are in the midst of something like that it's all consuming, I imagine, because for those three years, you, I assume, were thinking you could right this situation right until the very end. You thought you were going to be able to get out of it.
Nick: Yes, that was always the motivation that you'd be able to correct it, that you'd be able to keep it from people's attention or view. Because for me, as much as I needed to be successful and had that drive to be successful, for me the biggest fear was the fear of failure. And failure was anybody highlighting that I couldn't cope with what I was doing in Singapore, that I wasn't achieving, that I wasn't being successful.
And that failure comes through in two different ways; failure, it's embarrassing. For me, to this day, I will always be remembered for the most embarrassing period of my life, and that's difficult to take because you can achieve stuff either side of it, but still that period between 1992 and 1995 will always be the most embarrassing period of my life regardless of what I may do from this particular point.
Gabby: But it's all about learnings, isn't it? Learnings for you, learnings –
Nick: Yes.
Gabby: – for the whole industry.
Nick: Yes.
Gabby: And I'm sure that you had plenty of time to think about that when you were sent to jail for those financial crimes. There was a point, presumably, where you were only going to be embarrassed in front of your peers early on in this; this didn't have to go all the way, obviously, to the point that it did.
Nick: Of course.
Gabby: So why do you think – because you obviously wanted to right it, you’ve just said, but that’s – there’s a long way, isn’t there, from that early mistake that could have been something that was dealt with internally to the very end point. What do you know about yourself now that led you all the way?
Nick: I don’t know. Look, I’m a firm believer that behaviour exists on a continuum, and you can be at the good end of that and the bad end of that. I still look at certain behaviours that I have, and the way that I am in certain situations, and you can still pick out similarities. But as you said, it's about learning, and knowing when something could be going wrong, and stopping that behaviour at that particular point.
Unfortunately, my lessons were learnt in a very hard manner, and unfortunately they led to the collapse of a merchant bank, and an English merchant bank at that time as well. For me, there's lots of different things that come out of it, but you can … Asking for help and advice, I think, is such an important message. I didn't do that. It was a different time than it is now, and it was very – there was lots of ego, and organisations and people were great at celebrating success; people didn't talk about failure. There wasn't a great deal of psychological safety within the organisations.
If you brought something to somebody's attention you would be more worried that you were going to be ridiculed and people were going to laugh at you rather than take it seriously. So I think banks, financial organisations, and the world in general have come an awful long way in changing that. There’s a lot more psychological safety here in 2023 than there's ever been in any year that I've seen previously which I think is to be encouraged.
I'm sure that there were periods that I was going through depression, there were periods that other things were happening from a mental health perspective as well, and I wouldn't have been aware of those. I mean, I was diagnosed with cancer whilst I was in prison in Singapore as well, and I had no real knowledge of the signs that my body was telling me that something was wrong as well. But yes, look, asking for help and advice; I think communication is a huge tool. I think organisations haven't been as good at it over the years, over the last number of decades. I think it's improving.
But just as individuals being – feeling empowered enough to ask for help and advice, I think, is a really positive thing. And like I said, at the age of 25, as I was when I was in Singapore, I saw asking for help and advice as a sign of weakness, whereas I should have seen it as a sign of trying to do things correctly. And I was surrounded by people that could have helped me and pointed me in the right direction, but I just didn't do it. And it's such a simple thing to do, but it didn't happen.
I’m not really into wishful thinking, so I don’t really think like “I wish I did this.” The fact is I didn't, and as a piece of advice to encourage other people, and I encourage my children exactly the same way, always ask me for help.
Gabby: And because of what you went through in the bank, what happened with the bank, the landscape changed, and the way the whole industry worked changed. Do you think it would be possible for the same thing to happen again?
Nick: Not to the extent that you're going to see rogue trading to that sort of extent. It did occur a few times afterwards; you have Jérôme Kerviel, you have Kweku Adoboli, you’ve had scandals at JP Morgan with the London Whale, so there've been plenty of large scale scandals since that time. I often make remark of the fact that I'm down to 15th or 16th in the list of all time losses, and I’m only going down that league table, because there are some big ones still around. You’ve got Archegos Capital in recent years, you’ve got FTX the crypto exchange that’s collapsed as well.
So I think what you’re seeing at the moment is they’re in far more bespoke areas of the market, so the family firms, the crypto area, and I think all of those areas can learn from what’s gone on in the past. But I think the world of mainstream banking, investment banking is far safer; it’s got better controls, better systems, better – and most importantly, better people and better technology in place to make sure that it can’t go undetected for so long.
Gabby: And did they come and ask you, because obviously, yes, I don’t know if you know, Matthew Syed's Black Box Thinking which is that certain industries are better at looking at mistakes and learning from them than others, did anybody come and ask you?
Nick: No. No is the answer, and you don’t know why. I think – like I speak all over the world, Gabby, and sometimes I’ll be asked to an event in the UK, and one of the Big Four accountancy firms will get quite uppity about it, the fact that I’m there. It's a very English approach, whereas in the US you'll be going over, and you'll be asked to get involved in an investigative team that are looking into trading within major banks. And similar in South Africa when I've been to South Africa.
So there’s a British approach, and then there's a rest of the world type of approach. I think it's changing a little bit. I do do a lot of talking in the UK. And like I was in prison in Singapore for four years, so I was a captive audience, right?
Gabby: Yes, you'd have gladly had a visitor.
Nick: Yes, of course, because I didn't get many to be honest. But, yes, I would’ve spoken to anybody at that time just to have got out of a six foot, nine foot cell with two Triad gang members that weren’t getting on particularly well. So no, it’s strange, but no, they didn’t want to ask. And Singapore was the perfect example, or the perfect time to do that, because I was locked up for 23 hours a day and looking for something to do.
Gabby: Since your rehabilitation into the wider world after your time in prison has your – and it's been a bit of time now – has your relationship with money changed dramatically to the person who entered into that whole situation in Singapore?
Nick: I think the honest answer to your question is there've probably been some slight modifications, but I still hold the same things true. Like I said, I'm not material, I'm certainly not ostentatious; I live well, and I don’t try to hide that. I’ve been very fortunate since I was released from prison in terms of the type of opportunities that have come to my door, and I definitely try to make the best of those.
Gabby: What about your investment strategy then in terms of risk?
Nick: In terms of risk, now look, I’m a firm believer that you – I do have a pension pot, I invest it myself, so I trade maybe two or three different equities within that pension pot. And I understand the – or I understand better the association between risk and reward. But because of my background and the things that I did within the world of banking, you also understand that if you want to make money for investing there has to be a certain degree of volatility. You need to manage risk appropriately within that, but I’m drawn to some of the more volatile assets.
Gabby: So probably a little bit more high risk than the average investor then you'd say?
Nick: Yes, I'd say so. And for me, I like to make the investments myself as opposed to having somebody else do it. That doesn't suit everybody, and that's fully understandable, and that's why you have some great managed funds and individuals that people can get involved with, and the companies that they work for. It's just my personal preference. I don’t ever like being in a situation where I blame somebody for my own actions, and that includes my own investments, so I prefer to do those myself.
Gabby: You mentioned your children, and specifically about coming to you for help and making sure if you need help to speak up. What about with regard to money, and the education that you talked about before that you didn't get from your parents, and a lot of people don't in terms of “This is what you should do, put this money away. ISAs are a really …” you know, or whatever it is. Do you have those conversations with them? Do you want to educate them?
Nick: I do a little bit, and I give them a fairly honest and frank answer. I probably don't educate them as much as maybe I should in that regard. I think they're all still quite young, so the youngest is 18, the eldest is 24, and the two eldest ones are living on their own now; the youngest is still with us, so he's doing a Degree in Finance and Banking, I think.
Gabby: Are you on the syllabus?
Nick: I'm sure I am, yes. I think I'm on most syllabuses these days, but – for one reason or another. But just as a funny story, one of my friends, his son was 15 or 16 and they were doing the subject of Financing, or that they came across the story of Barings at his school. And the teacher was giving me a pretty bad run of it when he was introducing the story, and my friend's son stood up and said, “Look, you’re wrong, I know him, and he's nothing like that.” So yes, it's just weird scenarios that you come across from time to time.
Gabby: Did you feel – I'm sure you did feel at times – enormous guilt about what was happening, because obviously there's –
Nick: Oh, of course.
Gabby: – as you've mentioned a few times, there was the history of a bank like that, you know –
Nick: Yes.
Gabby: – all that, as well as the losses. And how did you deal with that?
Nick: Well, you've also got all the individuals as well, so I was asked, at an event in South Africa many years ago, why my ethical compass was so narrow. And I'd never really – up until that point I'd never really sat down and tried to work out what that meant, or why that was the case. But you just become so preoccupied with what's going on in your small area, and trying to solve the situation, that you're not thinking about shareholder value, you're not thinking about how your actions are going to impact upon other people.
And that's so important because my actions implicated 2,000 other people within the organisation over that period because they will have all ultimately gone to work for ING who bought the bank, but obviously the bank didn't recover, wasn't able to be saved. But you become very blinkered to what's going on around you. And as much as there were systems and processes and controls that should been in place, I was just focused on trying to survive for another short period in the belief I was going to manage to get to that Hail Mary type scenario where all of the losses would be extinguished.
And the strange thing that happens is you see all of these small positives, which ultimately are false positives, that you're going to be able to turn something around. And like I mean you go through a period of complete guilt, complete remorse, but then eventually you've got to move on from it. And that's probably the thing that dissatisfies most people, that you have been able to move on, and obviously the bank didn't. And I can apologise for that, and I can beat myself up about it, but that – I have a second opportunity, if you like, at life and family, and proving myself, and I'm going to take advantage of that.
Gabby: Thank you so much, Nick. It's been great chatting to you and hearing your current strategy for investment as opposed to one in a previous life. And also hearing how you pass that on to your kids. So I think people will really enjoy hearing your story. Thank you.
Nick: Thank you, Gabby.
Gabby: Thanks for listening to the ii Family Money Show. If you've got time, please give us a follow in your podcast app and leave us a review or rating. You can find loads of ideas on how to plan for you and your family's financial future at ii.co.uk. See you next time.