Leeson: Losses expose banking world's 'negligence'

Parallels between John Rusnak’s alleged €866m fraud and the collapse of Barings Bank expose ‘‘incompetence and negligence’’ in the banking world, rogue trader Nick Leeson claimed today.

He said there were ‘‘striking similarities’’ between the suspected bogus deals at Allied Irish Banks’ US subsidiary and his own 1995 scandal in Singapore.

The former trader said the latest revelations showed that many financial institutions had failed to impose effective checks.

‘‘I find it very frightening that such a thing can happen again because it means the same levels of incompetence and negligence within the mid and senior levels of the bank are still there,’’ he said.

‘‘The checks that should be in place to stop this sort of thing happening are extremely basic and people haven’t been doing them.’’

He said the biggest difference between the cases was that his £862m (€1.4m) losses on unauthorised trading in derivatives had brought down Barings, while AIB would be able to survive its losses.

AIB has insisted it did learn lessons from the Barings collapse, and that the two cases differ.

But Mr Leeson said Mr Rusnak, who has now voluntarily met FBI agents and prosecutors and denies having gone on the run, would probably have felt he was caught in the same spiral that trapped the Barings trader.

‘‘It’s a guy who has come from relative obscurity in the bank to become one of their star traders,’’ he told BBC Breakfast.

‘‘He’s got himself into a situation where he’s encountered some losses and in order to get around that he seems to have taken on bigger losses, bigger gambles, to try to make the money back.

‘‘Eventually you lose control, the position that you have got starts to control you.

‘‘People say ‘Why didn’t you stop earlier?’ and the same questions will be asked of this guy, but the fundamental question is why didn’t some of the middle and senior management of the bank stop him earlier?’’