Rogue trader who brought down Britain’s Barings bank says that Dubai’s reliance on expats reinforces financial system
Dubai’s reliance on expatriate expertise could help shield the emirate’s financial system from any future bust, according to rogue trader Nick Leeson, as economic growth and a rebounding property market fuel speculation of a new boom in the emirate.
Real estate prices have soared by as much 30 percent in the last year, prompting some analysts to raise concerns that Dubai could be entering a bubble similar to that which precipitated the 2008-2009 financial crisis in the glitzy Gulf emirate.
Leeson, the futures trader whose actions bankrupted 230-year old Barings bank in 1995, warned that Dubai’s financial system must have adequate checks and balances in place to ensure that history does not repeat itself.
“It’s a cycle - it’s a boom and bust. If you’re going through the boom again like you are at the moment you have to be a little bit worried. It’s important that there are adequate controls in place,” Leeson told Arabian Business. “Wherever there’s a growing economy there’s a certain element of risk involved.”
Leeson spent more than three-and-a-half years in a Singapore jail, before being released following a colon cancer diagnosis. He has since rebuilt his life in Ireland, where he works as an executive for a restructuring company.
Leeson said that Dubai was unlikely to experience any financial crises on the magnitude of those seen by Ireland and Iceland in recent years, due to its reliance on foreign expertise. “The one thing that’s slightly different about Dubai, if you were to contrast it with, say, Iceland many years ago, is that a lot of the experience and expertise in Dubai is brought in from other locations, be that the UK or the US, Australia, or wherever,” he said. “That’s a good thing because they’re bringing a compliment of skills.”
The Irish economy collapsed in 2008 after excessive foreign borrowing to fuel a real estate boom, while all three of Iceland’s major private banks folded in the same year after they failed to re-finance short-term debt.
“In Iceland, the risk managers were homegrown and slow to evolve and adapt. You had an economy that was growing at a massive rate, but they didn’t have the expertise or the experience to deal with at. Dubai may be different, but you do worry,” Leeson said.