Investors tally loss from greatest finance scandal

Hurriyet Daily News with wires

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Banks and investors worldwide were counting yesterday 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 $3 billion.

Madoff, a 70-year-old Wall Street veteran who was arrested Thursday, allegedly confessed to having defrauded investors of $50 billion 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). The bank said it had also invested 17 million euros of its own funds in Madoff products.

The second-biggest Spanish bank, BBVA, could potentially lose several hundred million euros, a newspaper reported yesterday.

El Pais said BBVA is exposed "for several hundred million euros through its purchases made through its treasury department" and "some managers put the figure at around 500 million euros."

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

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 collateralized 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."

Nomura’s exposure
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, according to Agence France-Presse.

In Britain, a spokeswoman for Royal Bank of Scotland said 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 said HSBC may be exposed to the tune of about $1 billion. The bank's exposure stemmed from loans it provided to institutional clients, mainly hedge funds of funds, who invested with Madoff, the daily said yesterday.

A British investment fund that also acknowledged being a Madoff client criticized what it called the "systemic failure" of U.S. regulators. Bramdean Alternatives Limited said the accusations against Madoff raised "fundamental questions" about the American financial regulatory system.

Other losses
Swiss bankers face losses of up to $5 billion, Geneva's Le Temps newspaper said.

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, media reports said yesterday.

Man Group, the largest publicly traded hedge-fund manager, has about $360 million invested in two funds linked to Bernard Madoff, Bloomberg reported.

Man Group’s exposure to Bernard L. Madoff Investment Securities is through RMF, its institutional fund of funds business, and accounts for 0.5 percent of the London-based money manager’s assets under management as at September 30.

Access International Advisors said some of its funds invested with Madoff.

Boston philanthropist Carl Shapiro’s charitable foundation lost at least $145 million to Madoff’s alleged Ponzi scheme, the Boston Globe reported, without citing its source.

Neue Privat Bank, a Zurich-based bank, said its clients may lose as much as $5 million from the scandal, while Societe Generale, France’s third-largest lender, said its exposure to Madoff investment funds is less than 10 million euros ($13.3 million).