European banks tot up their exposures

A veteran New York money manager has been charged with securities fraud in a scheme that is set to cost international investors at least $50bn.

Bernard Madoff, the founder of investment advisor Bernard Madoff Investment Securities, and former Chairman of the NASDAQ Stock Market, was arrested on Friday December 12.

On December 10, 2008, Madoff informed senior employees in the firm that his investment advisory business was a fraud. He said that he was ‘finished’ and that it had all been ‘just one big lie’. The business was insolvent, and had been for years, he said. He estimated losses from the fraud to be at least $50bn.

Since then, professional money managers and private investors have been trying to evaluate the extent of their potential losses.

Several major European banks have reported massive exposures to the fraud. Europe’s largest bank, Santander, said its clients had an exposure of €2.33bn. BNP Paribas, France’s biggest bank, said it could lose as much as €350m. And the UK’s Royal Bank of Scotland said it stands to lose about €400m.

Bernard Madoff Investment Securities claimed to rank among the top 1% of US securities firms. ‘Bernard Madoff has a personal interest in maintaining an unblemished record of value, fair-dealing, and high ethical standards,’ read the firms website.

According to regulatory filings, Madoff's investment advisory business served between 11 and 25 clients and had a total of approximately $17.1bn in assets under management.