On February 26, 1995, the Bank of England announced that the Bank of Bahrain would cease all operations in the market and would convene the Bank's major customers, creditors and shareholders to discuss a bankruptcy reorganization plan.

At the end of February, Hang Seng Bank's CEO Lin Weizhong also arrived in London to participate in the discussion of the bankruptcy restructuring plan of the Bank of Bahrain.

Since the Bank of Bahrain went through the bankruptcy process, basically the original shareholders and management could not speak. It is mainly the discussion between the customers and creditors of the Bank of Bahrain, and the first thing is to ensure the interests of the customers and creditors. After that, it is necessary to take into account the legitimate rights and interests of the employees of the Bank of Bahrain.

As for the interests of the shareholders of the Bank of Bahrain, if there are still assets left in the palm of the hand after the liquidation and reorganization, the repayment of the customer's funds, and the compensation to the employees, the shareholders may still be able to get three melons and two dates, but this probability is not large, basically, the Bank of Bahrain has lost all the shareholders' money, and the remaining money is the funds of customers and creditors, as well as the salaries of employees and unemployment compensation.

Founded in 1762, Bank of Bahrain is not only a 233-year-old brand, but also a brand with a special reputation in the high-end market. Because, even the British royal family has purchased the wealth management products of the Bank of Bahrain, which has been the royal financial adviser of the British royal family for nearly 100 years.

Due to the outstanding contribution of the Bank of Bahrain to the preservation and appreciation of the assets of the British royal family, the Bahrain family has received five hereditary titles.

It is precisely for this reason that in the current bankruptcy and restructuring plan of the Bank of Bahrain, the British royal family, also known as Queen Elizabeth, has the most important right to speak.

If you want to use bankruptcy restructuring to control the Bank of Bahrain, you will definitely need the support of the British royal family and the Bank of England.

"Your Majesty, Dear Queen!" Lin Weizhong, CEO of Hang Seng Bank, arrived in London on February 28 and made an appointment to meet Queen Elizabeth, "I take the liberty to bother, mainly because our boss, Mr. Lin Qi, has a bankruptcy reorganization plan for the Bank of Bahrain, and I hope to get your support! If you support our plan, then Mr. Lin can transfer his interests to the British royal family in other business aspects." For example, the British royal family has a large number of assets and hopes to maintain and increase their value, but high-quality assets in the world are always very rare. For example, Pangu Computer plans to IPO in a few years, if the British royal family can support Boss Lin's bankruptcy and restructuring plan for the Bank of Bahrain, then Pangu Computer Co., Ltd. can be listed at a favorable valuation to introduce British royal investment. Within a few years, there is a high probability of earning 3~5 times. ”

"Oh?" Although Queen Elizabeth doesn't know much about technology, she still watches the news and knows that the new entrepreneurship department should be called the world's top chaebol. Compared with the scale of assets, the assets of the British royal family are small compared to Lin Qi.

As for the scale and influence of Pangu Computer Company, although Elizabeth does not know much, she knows that this is a very powerful technology company, and if she buys shares before going public, she should not lose money.

A few days later, Elizabeth consulted a financial advisor to see if Pangu Computer Co., Ltd. was worth investing in, and the answer was yes. Pangu Computer Co., Ltd. is definitely a good company that looks fat and thin at a glance, as long as the valuation is not too expensive, it is difficult to lose money.

It is not very difficult to obtain the investment opportunity of Pangu Computer, and only needs the royal family's support for Lin Qi's restructuring plan for the Bank of Bahrain.

Lin Qi's restructuring plan for the Bank of Bahrain is a debt-to-equity swap. Originally, the interests of the shareholders of the Bank of Bahrain had been liquidated through bankruptcy liquidation.

However, Hang Seng Bank can take care of the interests of the original shareholders and shrink the equity of the old shareholders of the Bank of Bahrain to 10%. Hang Seng Bank, on the other hand, converted 225 million pounds of debt into a 90% stake in Bank of Bahrain. The equivalent of a £225 million capital injection has left Barings Bank with an already insolvent balance sheet, as net assets have gone from negative to positive when the debt is converted into a 90% stake.

"If, the creditors of the Bank of Bahrain, agree to my proposal. Bank of Bahrain will become a subsidiary of Hang Seng Bank, and Hang Seng Bank promises that if it takes control of Bank of Bahrain, the interests of all customers and creditors of Bank of Bahrain will be protected, whether it is principal or interest, without discount. "At the same time, we also guaranteed that the old shareholders, although the equity was diluted to 10%, still had a little equity." Employees of the Bank of Bahrain, we will not lay off employees either. However, in the future, we will strengthen the risk control and supervision of the Bank of Bahrain, and gradually become the financial institution with the strictest risk control in the world. ”

Representatives of the British royal family soon announced: "On behalf of Queen Elizabeth, I agree with the restructuring of Hang Seng Bank to the Bank of Bahrain!"

As the largest customer of the Bank of Bahrain, the British royal family has deposited at least £3 billion in the Bank of Bahrain. It can be said that, regardless of the influence of the royal family on the spiritual side of the Bank of Bahrain, from the perspective of the largest creditor, the royal family has the greatest say in the bankruptcy and liquidation.

With the British royal family agreeing, most of the other creditors and customers voted in favor. After all, the biggest concern is bankruptcy and liquidation, which does not guarantee the safety of everyone's principal and interest.

However, with a strong institution like Hang Seng, then the Bank of Bahrain should not have the problem of not being able to repay the customer's funds.

With the approval of the Hang Seng Bank's plan, on March 8, 1995, the global media once again appeared in the blockbuster news "Hang Seng Bank injected 225 million pounds to save the bankrupt Bank of Bahrain".

"On February 26, the Bank of Bahrain, which entered the bankruptcy reorganization process, reached a bankruptcy reorganization plan on March 7. The £225 million deposit originally deposited by Hang Seng Bank in the Bank of Bahrain was converted from debt to 90% equity interest in the Bank of Bahrain. The shareholders of the former Bank of Bahrain shrank their stake to one-tenth. This plan is already the most beneficial plan for old shareholders, so it has been supported by a large number of old shareholders. In addition, representatives of the British royal family, as shareholders and largest creditors of the Bank of Bahrain, also agreed with the Hang Seng Bank's proposal. After all, the other bankruptcy restructuring plan is ING's £1 takeover of Bahrain, with only the promise that the interests of other creditors will be guaranteed and that the Bank of Bahrain's brand will be retained. In the absence of Hang Seng's proposal, ING's proposal should be supported by the creditors and shareholders of the Bank of Bahrain. However, Hang Seng Bank's plan is obviously more conducive to the interests of all parties involved in the bankruptcy and restructuring of Bank of Bahrain, and in the end, this restructuring plan was approved, and it is reasonable for Hang Seng to become the controlling shareholder of Bank of Bahrain......"

"A nouveau riche bank in Hong Kong, holding a 233-year-old Bahrain bank of aristocratic blood in London, England!"

At the official press conference, the CEO of Hang Seng Bank and the CEO of Bank of Bahrain attended the announcement that Bank of Bahrain has become a subsidiary of Hang Seng Bank.

"We will respect the history and corporate culture of the Bank of Bahrain and give it the status of an independent operation, but at the same time, we will consult with the Bank of Bahrain to learn from the lessons and gradually strengthen the risk management of the company...... We believe that risk control is the core competitiveness of financial institutions relative to profitability. If you don't have the best risk control ability, the previous profit and accumulation are actually a castle built on the beach, and the waves will collapse when you beat ......"

……

The bankruptcy of the Bank of Bahrain was mainly due to Nick Lisson, manager of the newly formed Singapore Futures Division of the Bank of Bahrain. single-handedly destroyed a 233-year-old bank, and his personal deeds are enough to be written into financial history.

In fact, the timing of the bankruptcy of the Bank of Bahrain has also strengthened the risk control standards of the global financial industry. In later generations, financial institutions paid more and more attention to risk control, and Nick Lisson also contributed to it. It is this person who has proved that the risk control of the Bank of Bahrain is like a piece of, so major financial institutions will begin to pay attention to risk control.

Six years ago, Nick Lisson was only 22 years old but was already a staff member of the clearing department of Morgan Stanley Bank, and in order to better develop, he switched to the Bank of Barings in the United Kingdom. After moving to the Bank of Bahrain, Lisson was sent to the Far East, initially as an intern at the Indonesian branch. Because of his positive performance and good business performance, and having been in Asia for 3 years, when the Bank of Bahrain was preparing to establish a branch in Singapore, it considered promoting Nick Leeson, a senior employee, to the head of the Singapore branch.

In 1992, Nick Reeson was sent to the Singapore branch to set up a futures and options trading department and became the general manager. No matter what you do, mistakes are inevitable. But the key is how you deal with these mistakes.

This is especially true in futures trading. Some people mistake the "buy" gesture for a "sell" gesture, someone buys the contract at the wrong price, someone may not be cautious, someone may buy June futures instead of March futures, and so on. Mistakes can result in losses for the bank, and after these mistakes, the bank must deal with them quickly and properly. If the mistake is irreparable, the only possible way is to transfer the error to an account called the "wrong account" on the computer and report it to the bank's headquarters. When Leeson started working as a futures trader in Singapore in 1992, the Bank of Bahrain had an "error account" with the account number "99905" to deal with errors caused by negligence in the trading process. This turned out to be a normal wrong account in the course of the operation of the financial system.

In the summer of 1992, Gordon Bausser, who was in charge of the liquidation at the London headquarters, called Lisson and asked him to set up a separate "error account" to record minor errors and deal with them himself in Singapore, so as not to trouble the work in London. So Lisson immediately called Lisser, who was in charge of the office's liquidation, and asked her if she could set up a separate file. Soon, Lissell was typing some commands into his computer and asking him what account he needed. In Chinese culture, "8" is a very auspicious number, so Lisson used it as his auspicious number, and since the account had to be five digits, the "wrong account" with the account number "88888" was born.

A few weeks later, there was another phone call from the London headquarters, which had been equipped with new computers, and asked the Singapore branch to continue to follow the rules, and all error records were still reported directly to London from the "99905" account.

The "88888" erroneous account was put on hold as soon as it was created, but it became a real "erroneous account" stored in the computer, and the headquarters had noticed that there were many errors in the Singapore branch at this time, but Lisson cleverly prevaricated.

The neglected account of "88888" provided an opportunity for Lisson to create false accounts in the future, and if it had been canceled at that time, Bahrain's history could have been rewritten.

On July 17, 1992, one of Lisson's traders, Kim Wang, who had been in Bahrain for only a week, made a mistake: when a client (Fuji Bank) asked to buy 20 Nikkei futures contracts, the trader mistakenly sold 20 lots, and this mistake was discovered during Lisson's liquidation work that night. To correct this error, 40 contracts must be bought back, representing a loss of £20,000 at the closing price of the day, which should be reported to the head office in London. However, under various considerations, Lisson decided to use the wrong account "88888" to take 40 short contracts of Nikkei futures to cover up this mistake. Another mistake was made by George, a friend of Lisson's and commissioner. Because George was his best friend, Reeson signaled that he had sold all 100 September futures for the month, worth up to £8 million, and that several of the trading vouchers had not been filled in at all. If George's mistake leaks out, Lisson will have to say goodbye to his already happy life. Crediting the "888888 account" to the "88888 account" for a couple of mistakes made by George was a no-brainer. But there are at least three questions that plague him: how to make up for these mistakes, how to avoid the internal audit of the London headquarters at the end of the month after the mistakes are credited to the "88888" account, and how much they lose every day when SIMEX asks them to make margin calls.

The "88888" account can also be displayed on the SIMEX screen. In order to make up for the mistakes of his employees, Lisson transferred the commissions he earned to the account, but the premise was, of course, that these mistakes were not too large, and the amount of losses caused was not too large, but the mistakes caused by George were indeed too big.

In order to make enough money to cover all the losses, Lisson took on more and more risks, and he was engaged in a large number of straddle trades at the time, because the Nikkei was stable at the time, and Lisson would earn option premiums from the more trades. If you're unlucky and the Nikkei moves drastically, this trade will cost Bahrain a lot of money. Lisson did a great job in a while. By July 1993, he had turned the £6 million deficit in account "88888" into a slight surplus, when his annual salary was £50,000 and his year-end bonus was nearly £100,000.

If Lisson stops, then Bahrain's history will change as well.

In addition to covering up the mistake in the transaction, another serious mistake was to win over Bonifoi, the biggest customer in the Nikkei market. In late 1993, for several days in a row, market prices soared by more than 1,000 points per day, computer screens used to settle records malfunctioned frequently, and countless transactions were backlogged. Because the system doesn't work properly, the transaction records are all human. By the time the mistakes were discovered, Lisson had lost nearly $1.7 million in a single day. With no way out, Lisson decided to continue hiding these blunders.

In 1994, Lisson had become numb to the amount of loss, and the loss of account 88888 had risen from £20 million and £30 million to £50 million by July. In July '94, when the loss exceeded 50 million pounds, the headquarters sent someone to check the accounts, and Lisson lied that he had deposited 50 million pounds in his account with Citibank.

The loss is getting bigger and bigger, although it is constantly prevaricated by Lisson, but after all, the loss is a loss, and sooner or later the paper will not be able to contain the fire. Once this staggering loss leaks out, it's not just as simple as losing his job, Nick Lisson himself will be sued by the company, and it will be ironclad to sit in prison.

Because he is desperate, even if the amount of loss is further expanded, for Lisson himself, it will not be much worse, anyway, the nature is almost the same, the same is to go to prison, and his life will be completely ruined. However, if you take a bold bet again, you will win the bet and settle the loss account, and you may be able to get your life back on track.

So, at the beginning of '95, Nick Reeson took a chance and used more leverage to speculate.

On the one hand, Lisson bets on Japanese stock index futures, and at the same time, shorts Japanese government bond futures. The Japanese stock market was due to the economic downturn and the double crit of the Kobe earthquake in Japan, which led to the end of the rebound in the Japanese stock market and continued the bearish journey. The Japanese bond market is because the capital stock market and property market continue to plummet, and the government continues to cut interest rates, and the funds have nowhere to go, so they have to continue to buy bonds with relatively low risks and relatively high returns, and the bond market has ushered in a bull market.

The right investment direction should be long Japanese bonds and short Japanese equities.

However, Nick Leeson did the opposite.

"I was ashamed of myself for being such a liar — a small mistake at first, but now it was all around me, like cancer, and my mother was definitely not going to raise me like this," Reeson described in his autobiography. ”

After a failed speculation, Nick Reeson absconded, but was soon arrested, and later began writing an autobiography about how he brought down the Bank of Baring.

Through his autobiography, many financial institutions have learned a lesson and strengthened their risk management to avoid the emergence of crazy employees like Nick Leeson. In a sense, his experience of bringing down an established bank has inspired the financial industry far more than all kinds of successful people boasting about how to succeed.