Banks tally damage from Madoff scandal

December 15, 2008
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, MADRID, December 15 – Banks worldwide were counting on Monday their losses from an alleged scam run by New York trader Bernard Madoff, with Spain\’s Santander bank saying a subsidiary may have lost more than three billion dollars.

Madoff, a 70-year-old Wall Street veteran who was arrested on Thursday, is alleged by US prosecutors to have confessed to having defrauded investors of 50 billion dollars in a giant pyramid scheme that collapsed in the global financial crisis.

Santander, Spain\’s largest bank, said Sunday its investment fund Optimal has an exposure of 2.33 billion euros (3.1 billion dollars). The bank said it had also invested 17 million euros of its own funds in Madoff products.

French bank BNP Paribas revealed it could lose up to 350 million euros (470 million dollars), while Japan\’s top broker Nomura said Monday it faced losses of up to 27.5 billion yen (302 million dollars, 225 million euros).

A BNP Paribas statement said the bank had no direct investment with Madoff\’s company but "it does have risk exposure to these funds through its trading business and collateralised lending to funds of hedge funds.

"If, as a result of the alleged fraud, the value of the assets of these hedge funds is nil, BNP Paribas\’ loss could amount to around 350 million euros."

In Tokyo, Nomura Holdings "confirmed that its Madoff-related exposure is worth 27.5 billion yen," the group said in a statement.

"The impact of the exposure is relatively limited in the light of our accounting capital," it said.

In Britain, a spokeswoman for Royal Bank of Scotland told AFP the bank had "some exposure" to Madoff, but declined to give details.

European media have said HSBC of Britain and Union Bancaire Privee of Switzerland could also have suffered, although neither has admitted or denied losing money.

The Financial Times, citing people close to the situation, said HSBC may be exposed to the tune of about one billion dollars.

The bank\’s exposure stemmed from loans it provided to institutional clients, mainly hedge funds of funds, who invested with Madoff, the daily said Monday.

An HSBC spokesman in Hong Kong said he had "no comment" to make on the report in the Financial Times.

A British investment fund that also acknowledged being a Madoff client criticised what it called the "systemic failure" of US regulators.

Bramdean Alternatives Limited said the accusations against Madoff raised "fundamental questions" about the American financial regulatory system.

"It is astonishing that this apparent fraud seems to have been continuing for so long, possibly for decades, while investors have continued to invest more money into the Madoff funds in good faith," the firm said in a statement.

Bramdean Alternatives invested around 21 million pounds (23.3 million euros, 31.2 million dollars), or around 9.5 percent of its portfolio, with Madoff\’s company.

British newspapers reported that among Bramdean\’s clients is property magnate Vincent Tchenguiz, one of Britain\’s richest men, who apparently invested 40 million pounds with the firm.

Swiss bankers face losses of up to five billion dollars (3.7 billion euros), Geneva\’s Le Temps newspaper said.

It said Union Bancaire Privee, a major asset management institution specialising in hedge funds, could be exposed to the tune of one billion dollars.

UBP refused to comment on the report, which said that 90 percent of fund management companies operating in Geneva invested in products of Bernard L. Madoff Investment Securities LLC.

Italy\’s stock market watchdog, the Consob, has launched an investigation into the impact of the scandal on the national financial system, Ansa news agency reported.

The Bank of Spain also opened an investigation to determine the level of involvement of Spanish companies, the Spanish daily El Mundo said.

South Korean institutions could lose some 100 million dollars, media reports said Monday.

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